Startups play an important role in development of a country as they not only contribute to the GDP but also generate employment for the masses. The Department of Promotion of Industry and Internal Trade (DPIIT) plans on approaching the cabinet with a recommendation to create a Startup India seed fund and begin a credit guarantee scheme to help the budding entrepreneurs.
The objective behind National Seed Fund is to help the startups in initial stages of their development and ideation while the credit guarantee scheme is aimed to provide startups with easy capital. One of the officials informed that the note addressed to the government is in advanced stage right now.
Both the proposals contribute to the bigger picture to improve the startup ecosystem of the country and the overall vision for the sector will detail the priorities that require support. BJP during its 2019 election manifesto promised the setup of seed startup fund of Rs 20,000 crore to back startups and a scheme to provide collateral free loans up to Rs 50 lakh wherein 50% of the amount was targeted towards female entrepreneurs and 25% for male entrepreneurs.
The promised National Seed Fund was announced in 2020-21 budget to help the startups in early stages. The government is proactive in attracting investors for Indian startups and are already evaluating the progress of Startup India Programme. India ranks at 63 in the World Bank’s ease of doing business table and has a sub-rank of 136 in ‘starting a business’ category.
Covid-19 has massively affected the operations of startups in the country. According to Nasscom, 40% of the startups have temporarily paused operations or are in the process of shutting down with around 70% having cash reserves that can last only for three months.
Presently, the startups get funding from government supported Rs 10,000 crore fund through Small Industries Development Bank of India (SIDBI). The officials are assessing the revenue implications of both the schemes right now.