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To sort out concerns of adequate funding for start-ups, the DPIIT is pressing for implementation of the Credit Guarantee Scheme for Startups (CGSS) and Startup India Seed Fund Scheme (SISFS) in the forthcoming Budget.
“The DPIIT is in talks with the Finance Ministry on implementation of both schemes that could sort out funding issues for start-ups considerably. It wants the matter to be addressed in this year’s Budget, but a final decision is yet to be taken,” an official told BusinessLine.
Through various studies it has been established that a big concern for start-ups is inadequate funding available for their capital requirement for growth, the official said.
One of the biggest challenges faced by start-ups is access to early-stage debt to finance their capital requirements for growth, the official said. “Some start-ups begin their venture but cannot proceed far as they face a fund crunch soon as it is difficult for many to obtain loans from banks,” the official said.
Fuel entrepreneurship
The Startup India Action Plan of 2016 thus proposed the CGSS to fuel entrepreneurship by making credit accessible to innovators and encourage banks and other lending institutions to provide them with venture debt. “The DPIIT wants to notify the CGSS with an outlay of ₹2,000 crore to provide much-needed debt funding to start-ups as soon as possible,” the official said.
The second scheme being pushed by the DPIIT, the SISFS, to provide seed funding to start-ups with an innovative idea to conduct proof of concept trials, is also in the process of being finalised. It will provide financial assistance to start-ups for proof of concept, prototype development, product trials, market entry, and commercialisation, the official said.
Proposal
An EFC (Expenditure Finance Committee) note on the SISFS proposed corpus of ₹945 crore was formulated by the DPIIT and circulated to concerned Departments and Ministries some time back, the official said.
“The DPIIT is keen that both schemes for startups are notified as soon as possible and has had initial discussions with the Finance Ministry on the matter. Although, there is a fund crunch that the government is facing due to the Covid-19 crisis, it hopes that this year’s Budget will give priority to the needs of start-ups,” the official said.
India has about 50,000 start-ups in India in 2018; around 8,900–9,300 of these are technology led start-ups 1,300 new tech start-ups were born in 2019 alone implying there are 2-3 tech start-ups born every day, as per government figures.