The National Innovation Council and the Ministry of Micro, Small and Medium Enterprises (MSME) have jointly announced the creation of the India Inclusive Innovation Fund (IIIF). Approved by the Union Cabinet, the fund was conceived as a unique concept that seeks to combine innovation and the dynamism of enterprise to solve the problems of citizens at the base of the economic pyramid in India.

Speaking about the fund, Sam Pitroda, Chairman of the National Innovation Council (NInC) said: "The needs of the people at the base of the economic pyramid are today served by philanthropy and government grants and subsidies, which can never be either adequate or scalable. IIIF seeks to leverage the model of venture capital to transform the lives of the less privileged."

The IIIF seeks to create a new class of capital which helps set up and scale entrepreneurial skills and innovation. The fund will invest in innovative ventures that are scalable, sustainable and therefore profitable, but address social needs of the less privileged citizens in areas such as healthcare, food, nutrition, agriculture, education and skill development, energy, financial inclusion, water, sanitation employment generation, etc.

The fund will be registered under SEBI’s Alternative Investment Fund Category I guidelines with an initial corpus of Rs 500 crores, with the Ministry of MSME committing to 20 per cent (Rs 100 crores) and the balance being given by banks, insurance companies and overseas financial and development institutions.

The fund’s eventual aim is to expand the corpus to Rs 5,000 crores over the next 24 months. The NInC was set up by the Prime Minister to create an Indian model of innovation.

Lack of capital has been one of the major reasons why ventures and entrepreneurs seeking to address the needs at the base of the economic pyramid have failed to take off, with IIIF seeking to address exactly this gap. At least 50 per cent of its investments initially would be to enterprises that fall in the MSME stage.

The IIIF would also partner the entire ecosystem in this space, including incubators, angel groups, and also public research and development programmes and laboratories to support the commercialisation and deployment of socially relevant innovative technologies and solutions.

The government would not be involved in the day to day operations of the fund, and it would be entrusted to an Asset Management Company.