Budding entrepreneurs and startups have something to look up to as the Department for Promotion of Industry and Internal Trade (DPIIT) plans to reach out to the Cabinet with a proposal to create a Startup India seed fund and launch a credit guarantee scheme, according to an Economic Times report. The National Seed Fund is aimed at facilitating the ideation and development of early stage startups. The credit guarantee scheme will at the same time enable them to raise loans easily. "Work on the Cabinet note is in advanced stage," an official said to Economic Times. He added that the two schemes are part of a larger roadmap to improve India's standing on the startup front.
BJP in its election manifesto in 2019 had vowed to create a seed startup fund of Rs 20,000 crore to support companies in their initial stage and to come up with a scheme to offer collateral-free credit of up to Rs 50 lakh for entrepreneurs. The government seems keen to rope in investors for Indian startups and is eyeing the progress of the Startup India programme. According to the apex software and services body Nasscom, 40 percent of startups have either temporarily stopped operations or are in the process of shutting down, and are left with cash reserves that can last only for three months or less. The industry has knocked on the doors of the government.
In the current scheme of things, startups can avail support from the government-backed Rs 10,000 crore fund through Small Industries Development Bank of India (SIDBI). However, it cannot be directly invested in startups. It provides capital to alternative investment funds (AIF), known as daughter funds, which are registered with the Securities and Exchange Board of India (SEBI). These AIFs in turn are invested in growing Indian startups through equity and equity-linked instruments.
The official also added, "The revenue implications of the two schemes are being assessed." Startup India initiative was launched on January 16, 2016, and since then DPIIT has recognized 28,979 startups as of March 1, 2020.