Commerce Minister Piyush Goyal's scathing remarks on Indian startup ecosystem and its innovation priorities have drawn sharp reaction from the industry, with Zepto CEO Aadit Palicha putting up a strong defence citing the company's contribution to jobs, FDI and terming it a "miracle in Indian innovation".

Underlining the role played by consumer internet companies in pushing technology-led innovation, Palicha - one of the most recognised faces in the startup circles, and the co-founder of quick commerce company Zepto - argued that the startup ecosystem, the government, and the owners of large pools of Indian capital need to actively support the creation of these local champions, "not pull down the teams that are trying hard to get there".

"It is easy to criticise consumer internet startups in India, especially when you compare them to the deep technical excellence being built in US/China. Using our example, the reality is this: there are almost 1.5 Lakh real people who are earning livelihoods on Zepto today - a company that did not exist 3.5 years ago," Palicha said in a LinkedIn post.

The Zepto co-founder statement comes after Goyal on Thursday asked the Indian startup community to shift their focus from grocery delivery and ice cream making to high tech sector like semiconductor, machine learning, robotics, and artificial intelligence.

"Are we going to be happy being delivery boys and girls... Is that the destiny of India... this is not a startup, this is entrepreneurship... What other side is doing -- robotics, machine learning, 3D manufacturing and next generation factories," Goyal said on Thursday, comparing the nature of Indian startups with that of Chinese.

Palicha went on to count many other economic contributions, and placed many arguments.

"Rs 1,000 plus crores of tax contribution to the government per year, over a billion dollars of FDI brought into the country and hundreds of crores invested in organising India's back-end supply chains (especially for fresh fruits and vegetables). If that isn't a miracle in Indian innovation, I honestly don't know what is," he wrote.

Why doesn't India have its own large-scale foundational AI model, he quipped, then added "It's because we still haven't built great internet companies".

"Most technology-led innovation over the past 2 decades has originated from consumer internet companies. Who scaled cloud computing? Amazon (originally a consumer internet company). Who are the big players in AI today? Facebook, Google, Alibaba, Tencent etc. (all started as consumer internet companies)," he said.

Consumer internet companies drive innovation because they have the best data, talent, and capital to put behind it.

"We need to build great local champions in the internet that are generating hundreds of millions of dollars in free cash flow (FCF) first if we ever want to get a piece of great technology revolutions. The startup ecosystem, the government, and the owners of large pools of Indian capital need to actively support the creation of these local champions, not pull down the teams that are trying hard to get there," he argued.

Zepto, he said, is still far away from being a great Internet company that can hold a candle to the global best, but is "executing day in and day out to get there".

"I can promise that any capital we generate from this business (and it honestly looks like we will) will be invested towards long-term innovation and value creation in India.

"That is essentially what I am dedicating the next few decades of my life to try to do: create dynamism in the Indian economy and our capital markets, in the same way the Americans have for decades. We have the talent and capital; we just need the execution," he further said.

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