Start-up India Action Plan – Devil is the detailing (Part 6)

FUNDING SUPPORT AND INITIATIVES

Fund of Funds with a Corpus of INR 10,000 crore

In a recent Union cabinet meeting, the central government has approved the establishment of INR 10,000 crore ‘Fund-of-Funds for Start-ups’ at Small Industries Development Bank of India (SIDBI) for contribution to various Alternative Investment Funds (AIF), registered with SEBI which would extend funding support to start-ups. This would be built up over the 14^th and 15^th Finance Commission cycles, subject to the progress of the scheme and availability of funds. An amount of INR 500 crore has already been provided to the corpus in 2015-16 and Rs.600 crore earmarked in the 2016-17.

Devil is in the detail: This would only be helpful for larger start-ups with a sizable initial investment.

Credit Guarantee Fund for Start-ups

With a budgetary corpus of INR 500 crores per year for the next four years, banks and other lenders shall be able to provide start-ups with venture debts and a credit guarantee mechanism through a National Credit Guarantee Trust Company/SIDBI. This seeks to act as a catalyst to entrepreneurs by providing credit facility to innovators across all sections of the society.

INDUSTRY-ACADEMIA PARTICIPATION AND INCUBATION

Launch of Atal Innovation Mission (AIM) with Self-Employment and Talent Utilization (SETU) Program: AIM shall help foster innovation at a grass root level among students in schools and colleges. It also seeks to promote research and development by setting up 500 tinkering labs, 35 public-private sector incubators, 31 innovation centres at national institutes, 7 new research parks, 5 new bio-clusters etc.

Organizing national and international start-up fests for showcasing innovation and providing a collaboration platform, harnessing Private Sector Expertise for Incubator Setup and annual Incubator Grand Challenge.

Many amendments to key legislations / policies / schemes have been successfully implemented and in the coming months many more welcomes changes are anticipated. However, to further encourage the growth and development of start-ups as envisaged in the Action Plan, structural reforms that permit free and fair competition and other changes that shall fortify the viability and existence of start-ups need to be brought about.

While tax incentives, cost saving measures and funding support will undoubtedly drive up investment into innovative start-ups it is essential that the government not lose sight of non-tech start-ups. It should make special provisions to ensure that this support structure extends to the agriculture, manufacturing, and handicrafts sectors.

The Action Plan has more or less been consistent with the government’s call to be a facilitator to build up a start-up nation. But it will need continued support and evolution to strike the perfect balance between accountability, transparency and ease of doing business.

[This is the last of a series of 6 posts that seeks to consolidate all the benefits and policy directives directed towards promoting Start-ups in India.]