India’s Startup Boom Is Built on State Failure — And That’s the Real Crisis

India is hailed as a rising startup superpower. Unicorns are being minted at record speed, apps are solving everyday problems, and global investors are pouring in billions. But what if we told you that most of these startups aren’t solving the future—they're patching up the past?

Kedar Gadgil, Co-founder at PrashiXan, made a sharp observation: 

“Most Indian startups are less about creating new frontiers and more about plugging old, persistent holes. They monetise dysfunction.”

He's not exaggerating. If the Indian state were even moderately competent at delivering basic public services, over 80% of our startups wouldn’t exist. Because their markets wouldn’t.

Startups in Education, Mobility, and Healthcare: Innovation or Substitution?

Let’s decode this with examples.

🔹 EdTech: Outsourcing the Classroom

Byju’s and Unacademy didn’t grow on academic brilliance—they thrived because government schools failed to deliver. Millions of Indian parents turned to private apps because they couldn’t trust the public education system.

🔹 Mobility: Filling Infrastructure Gaps

Ola, Rapido, and Bounce are not just ride-hailing platforms. They’re substitutes for broken public transport. Their growth reflects our unreliable buses, lack of metro access, and unsafe roads.

🔹 HealthTech: The Doctor Won’t See You Now

Startups like 1mg, PharmEasy, and Practo don’t represent luxury—they are lifelines in places where government hospitals are overcrowded or nonexistent. They offer medicine delivery and tele-consultations where the state simply doesn’t reach.

“These are not capitalist marvels; they are prosthetics for a limping republic,” Kedar says.

India’s Jugaad Culture: Innovation or Systemic Collapse?

India loves the word jugaad. But what if it’s less about innovation, and more about surviving dysfunction?

• Dunzo, Zepto, Blinkit: Born out of chaotic city planning, traffic jams, and inaccessible markets.
• NoBroker: Thriving because housing societies and local brokers act like unregulated mafias.
• Meesho, Shop101: Giving small-town sellers access to markets bypassed by traditional retail.
• Khatabook, OkCredit: Offering digital credit management where formal banking won’t step in.

These aren’t just startups—they’re stand-ins for what the government should have built.

How the State Is Quietly Outsourcing Public Services to Startups

The most subtle—and dangerous—shift? The state has quietly exited the stage while startups step in.

• Cred gamifies bill payments because dealing with discoms and utility portals is a nightmare.
• Razorpay, PhonePe, Paytm grew on the backbone of Aadhaar and UPI—both government innovations—but succeeded by fixing the user experience the government couldn’t deliver.

This creates a dangerous loop:

“The more these band-aid startups plug state failures, the less incentive elected leaders have to fix them,” warns Kedar.

Politicians find it convenient—someone else is doing the job, and better yet, footing the bill. The public system continues to rot while the private sector wears a shiny coat of efficiency.

From Public Goods to Premium Apps: The Rise of Subscription Governance

Here's the real threat: Public goods are becoming private services.

• Education via paid courses.
• Health via consultation apps.
• Transport via ride-hailing.
• Housing via brokerage platforms.
• Water, safety, sanitation? Coming soon to an app near you.

Everything once guaranteed as a citizen’s right is now being bundled as a product. Behind India’s glittering digital economy lies a rotting civic skeleton—with no plan to rebuild the bones.

“We will have built a gleaming digital economy atop a rotting civic skeleton,” Kedar warns, “with no plan to replace the bones.”

The Startup Nation or a Sellout Society?

India must decide what kind of startup nation it wants to be.

We cannot keep celebrating bandages as breakthroughs. We cannot replace accountability with convenience. And we cannot let apps become the new government just because they come with 10-minute delivery and better UX.

Because if we continue down this path, we won’t just be outsourcing services—we’ll be selling off the very responsibility of the state.

“If we do not arrest this spiral,” Kedar concludes, “the endgame is clear: a society propped up by branding, held together by convenience, and abandoned by the very state sworn to uphold it.”

Rebuilding the State, Not Just Downloading Apps

To truly empower Indian innovation, we must fix the foundations—education, healthcare, mobility, housing, public safety. Startups can thrive on solving real problems, not government-created ones.

Let’s build a nation, not just a market.

Let’s stop mistaking survival hacks for progress.

Let’s demand both governance and innovation—not one at the cost of the other.

Disclaimer & Attribution

This article is inspired by a public post shared on LinkedIn by Kedar Gadgil, Co-founder at PrashiXan. While the original observations belong to the author, this article presents an independent journalistic interpretation, elaboration, and contextual expansion for public interest. 

For editorial queries, content rights, or clarifications, please write to us at: editor@tice.news