This appeal has been made by Startups Association of India (SAI) by way of a communication to the Union Minister for Commerce and Industry, Piyush Goyal.

Industry body wants govt to set up Rs 25000 crore fund for startups
Atom Startups Friday, May 01, 2020 - 07:35

The government is being asked to solidify its support for startups, as already announced, by establishing a fund of ₹25,000 crore, as per a report in the Economic Times. This appeal has been made by Startups Association of India (SAI) by way of a communication to the Union Minister for Commerce and Industry, Piyush Goyal.

It may be recalled that the government has already parked an amount of ₹10,000 crore meant to be used for funding startups with the Small Industries Development Bank of India (SIDBI). SAI wants the government to bring in another ₹15,000 crore and create a separate fund of funds with the name Startup India Fund (SIF). Even as the government keeps sending in its contributions over a staggered period, the SIF can attract funding from outside to build a corpus of $10 million. There are overseas investors and sovereign funds keen to make investments in such fund of funds. The Association has further suggested that the government can have the fund registered as an Alternative Investment category-II Fund, and appoint professionals to manage it. It will not be very different from the National Investment and Infrastructure Fund, they have pointed out.  

SAI has pointed out that only around ₹1,025 crore has been distributed by SIDBI out of the ₹10,000 crore it got.

Besides the minister, the letter goes to Guruprasad Mohapatra, secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) as well. The DPIIT is the nodal agency within the government that oversees  the startups in the country.

The other thorny issue that the Startups Association of India has raised in its letter is with regard to investment from Chinese firms. The government has recently issued a directive that investments by Chinese firms in Indian companies will first have to be vetted by the government. This has been done from the security angle that using the very low valuations of stocks in the Indian bourses, some strategically important Indian companies may be acquired by Chinese entities which could pose difficulties later. It is an open secret that Chinese companies are either owned and controlled by the Chinese government or ruling party members or can be dictated to, by the authorities in power.

The fact remains that Chinese investors have invested as much as $3.9 billion in the year 2019 against $2 billion the year before. This is a 100% increase.

Ant Financial, the investment arm of the Alibaba Group, Tencent Holdings and Fosun RZ Capital are some of the major investors. Some of the Indian startups that have received funding from them include Paytm, Zomato, Delhivery, BigBasket, PolicyBazar, Udaan, Oyo Hotels & Homes, Ola and Dream11, and so on.

The Association is demanding that startups be exempted from the recent order on Chinese investments. Some of the well-known names in the Indian startup horizon are part of the SAI. These include Deep Kalra of MakeMyTrip; Sanjeev Bikhchandani of Info Edge; Dinesh Agarwal of IndiaMart, as well as Mahendra Swarup, from Venture Gurukool.

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