The government appears to be lending its ears to problems being faced by some of the business sectors in the country. In a move initiated by the Union Commerce Ministry, under the Startup India banner, the government has asked the venture capitalists operating here to let it know the issues being faced by them.
The Indian Venture Capitalists Association (IVCA), the trade body representing the players involved in investing in the Indian startups, is now expected to make a submission, possibly in the form of a white paper, explaining the hurdles being faced by them currently and making suggestions for solving them.
Incidentally, the Ministry had already had a consultative meeting with all the stakeholders involved and this move to ask the industry to submit its side of the story could have come out of the deliberations in that meeting.
Besides, the Minister Suresh Prabhu himself, the government and regulatory side was represented in that meeting by the Department of Industrial Policy and Promotion (DIPP), Small Industries Development Bank of India (Sidbi), Securities and Exchange Board of India (Sebi) and the Department of Revenue and Department of Economic Affairs. The venture capitalists were represented by the leading VCs.
Among the issues that could find place in the submission by the IVCA, taxation related issues, employee stock options, smoother access to capital are predicted to be highlighted for consideration of the government. With the next general elections slated for 2019, the government seems to be in a hurry and the industry is hopeful that the Ministry will respond quickly and come out with the solutions to the problems the startup ecosystem is currently faced with in India.
Already, the VCs had raised the issue of alternative investment funds (AIFs) from the taxation angle so that they can also make funds available to the startups. Under this, there is also the case for allocation of funds by the different ministries to encourage startups falling within their jurisdiction with a view to encourage entrepreneurship and to increase the employment potential. There are procedural hurdles in drawing these funds and the government may have to review these and remove the bottlenecks.
Some fund managers have already received fund assistance through institutions like SIDBI and similar engagements and government-VCs meetings had been held in the past as well.