With 1/10th of start-up corpus spent in 2 yrs, PM Modi now promises Rs 1 lakh Cr for startups

Promising good times for startups in India, Prime Minister Narendra Modi has said that Fund of Funds (FFS) created by the government will ensure funding to the tune of Rs 1 lakh crore for startups.

“When the fund of funds completes its fund-raising, the corpus will touch almost Rs 14,000 crore. Thus, when the fund of funds matures over time, almost Rs 1 lakh crore will be available for startup funding in India,” said the PM while interacting with entrepreneurs.

He claimed that the incumbent government has worked to support startups through various works including setting up of tinkering labs, incubation centres, removing regulatory hurdles, providing tax incentives and support in the field of legal issues and intellectual property rights.

Many startups have been registered in about 419 districts in 28 states and 6 UTs so far, out of which 44 per cent are in tier 2 and 3 cities. This shows that youth from small cities and villages can contribute to the country's growth story, he added.

He also emphasised startup movement growing beyond digital and technology innovation and entering in various other fields, including agriculture.

The government had launched the Startup India Action Plan to promote budding entrepreneurs in the country. The plan is aimed at giving incentives such as tax holiday, Inspector Raj-free regime and capital gains tax exemption, Modi said.

On ground Startups issues

In Jan 2016, under Startup India, Narendra Modi announced a slew of measures for startups including—felicitating them through simple and uncomplicated regulations, guiding and mentoring startups, ease of doing business, tax breaks, and a fund-of-funds—to rev up the start-up engine and enable entrepreneurship, technological progress and innovation.

More than two years down the line, what we see is not a much forward movement in this regard.

Despite being the most promising plan under the initiative, it is yet to achieve what it set out to.

Till date, only about one-seventh of applications have been considered for tax benefits. Still banks do not give a loan without any collateral.

In August 2017, according to an RTI response, only Rs 623.50 crore was committed to 17 AIFs. However, only Rs 68.3 crore was disbursed in 72 startups by the 10 AIFs. The allocated funds by the government were given to SIDBI not directly to startups.

There seems to be an apparent gap between the statements of the government and the ground reality in the startup ecosystem. On ground start-ups are still far from getting the benefits that are being claimed.