Why India is placed near the bottom of this Global Startup Index

By Lee Kah Whye
Singapore, April 3 : In a recent study by the AI website Business Name Generator (BNG), India was placed among the most challenging country to launch a startup. To create this global startup index, the AI-powered website analysed 50 countries considering among other criteria, business tax rates, GDP growth, and the cost of startup procedures to determine the optimal location to start a business.
The BNG study also looked at each country's population, average monthly salary, GDP and GDP per capita. Furthermore, happiness score, the cost of living, and quality of life were included in calculating the final index score to find out where the most content employees reside, as these measures help drive productivity and growth.
Based on the BNG study, the top ten countries to launch a startup in 2023 are all European with the Czech Republic emerging as the numero uno. Finland, Sweden, Estonia and Slovakia made up the top five in that order.
With the Nordic countries typically doing well in surveys which emphasise quality of life and happiness, it should not be a surprise that two of them feature in the top five. In addition, Europe is attracting tech talent by offering digital nomad visas and remote working schemes.
In the study, the Czech Republic emerged as the best country to launch a startup. Although its quality-of-life score is the lowest among the top ten, starting new business costs just 1.1 per cent of GNI (gross national income) per capita, and it is one of the least expensive places to start trading. Labour costs are also reasonable, with salaries averaging USD1,800 per month. In addition, companies enjoy a comparatively low corporate tax rate of just 19 per cent.
Finland, which is ranked as the second-best country for startups, an advantage over other countries lies in its relatively low business tax rate of 20 per cent and low cost of starting a business of just 0.7 per cent of GNI. The country is also home to the world's happiest people, which has positive implications for business leaders. Studies have shown that happy employees lead to better business outcomes, including increased productivity, improved work quality, and higher retention rates.
Rounding off the top three is Sweden where the cost of launching a startup is just 0.5 per cent of GNI per capita. It also has the highest GDP among the top five countries at USD 59,324 per capita and a reasonably low cost of living at USD 881.20 per month excluding rent. This indicates that its more than 10 million residents (the largest population among Nordic countries; almost twice more than the next largest) have a large disposable income. With a large consumer base, it is well-positioned to support a local startup. However, business tax in Sweden is slightly higher compared to the Czech Republic and Finland at 20.60 per cent.
For comparison, the United Kingdom ranked sixth.
A startup study is not complete without the United States as it produces the largest number of startups in the world. The US was placed 17th because of its low GDP economic growth rate of 1.6 per cent - the third lowest overall. Business tax rates which differ by state are also relatively high with an average rate of 25.8 per cent. Despite this, the study highlighted that the US remains a popular destination for entrepreneurs due to its large market, well-developed infrastructure, and supportive legal system for protecting intellectual property.
The study also revealed that the five most challenging countries to produce a successful startup are all in Asia bar one. The Philippines has the dubious honour of being at the bottom of the list followed by Egypt, India, South Korea and Vietnam, respectively.
It is rather surprising for India and South Korea to be at the bottom of a startup index given the vibrant startup ecosystems in these two countries.
South Korea is well-known for being a high-tech hub and for its innovation.
Indeed, based on a World Economic Forum report on the best countries for entrepreneurs published in 2022, India was ranked 17th out of 50 countries and South Korea was in 7th position.
In another research report by StartupBlink, which uses more extensive criteria to create its ranking, India was ranked 44 out of 100 countries and South Korea was placed 22nd. The StartupBlink study also includes such parameters as patents, innovation, availability of technology services, R&D investment, quality of universities and English proficiency.
Based on Invest India, India is the 3rd largest ecosystem for startups globally with over 77,000 startups. From 2015 to 2022, India saw a 15 times increase in funding of startups, a nine times increase in the number of investors and a seven times increase in the number of incubators. India is also home to 107 unicorns with a total valuation of USD 340.79 billion.
The BNG research ranked India as the third most challenging country for launching a start-up mainly because of its low scores for quality of life and poor score in the happiness index. The report said, "This could greatly impact job satisfaction, productivity, and overall well-being in the workplace." Additionally, the country's 30 per cent business tax rate may offset some of the savings gained from affordable labour costs, which is low compared with other countries in the study.
The biggest reason the Philippines has been rated the most challenging country in which to launch a startup is the cost of starting a business in the archipelago nation. It is the highest among all the countries in the analysis at 23.3 per cent of GNI per capita. "Moreover, the average salary is relatively low at USD 850 per month, and the quality-of-life score for employees is the lowest (81 out of a possible 240) among all the locations ranked, which could negatively impact productivity, employee engagement, and job satisfaction."
One of the reasons offered by BNG for conducting the study is to help entrepreneurs choose the right location for their business. The author of the report, Adaline Lefe, said, "Every country has its own distinct advantages for businesses, leading to variations in the best environment for startups. In today's interconnected world, common challenges faced by businesses can amplify the pressure of running a company, making it increasingly crucial for entrepreneurs to choose the right location for their firm."