To borrow from Charles Dickens, these are the best of times, these are the worst of times for Indian businesses. On the one hand, the news on the economic front is not particularly cheerful. High commodity prices, old debt and overcapacities in several industries have ensured that a great many firms in different sectors are still struggling to raise revenues and margins. To top it all, the Infrastructure Leasing & Financial Services (IL&FS) defaults - which briefly threatened to trigger off a chain reaction among a number of financial and asset management firms, before the government stepped in firmly - shows that all is not well with our banking and financial system.
On the other hand, this year's Coolest Start-ups Survey shows how far young entrepreneurs have evolved. Even five years ago, most of the applications we received for our annual survey would be me-too ideas, copied from successful models abroad but tweaked to fit the Indian market conditions and consumer sensibilities. Execution capabilities, rather than originality of thought, were rewarded both at the marketplace as well as by venture capitalists and angel investors.
In the last couple of years, though, we were seeing many applications touting all new products and ideas that had been conceived and developed entirely within the country. Some of the home-grown entrepreneurs are not only hoping to crack the domestic market but also win success overseas. They are also moving away from plain e-commerce to areas such as waterless cleaning solutions, better mattresses, AI-powered logistic solutions to keep drivers alert, water purification, etc.
They are likely to revolutionise entire industries as they scale up. You will read about their fascinating ideas and stories in the special package on Coolest Start-ups in our magazine.
The other big story of this issue - The IL&FS blowout and the government's efforts to fix the system - shows that systemic changes are required in our financial sector. The government and the regulators need to work together to make sure that another IL&FS does not happen. IL&FS was considered a systemically important non-banking financial company, but it was not just that. It was a company that took up and tried to execute over 300 infrastructure projects, took on debt in each of these, and managed to keep its problems secret from the regulator for a long time.
The fact that only one part of it was under the oversight of the Reserve Bank of India (RBI) ensured that it could keep the other problems hidden. The RBI had still managed to spot problems at IL&FS many years ago, and had asked it to reduce its debt to subsidiaries and related parties, but the company flouted those instructions.
While the government has taken steps to stop the IL&FS collapse from triggering of a bigger wave of problems in other NBFCs, it would be interesting to see if it also makes systemic changes that will prevent such a problem in the future.