In Depth

What happened to the '10000 Cr startup fund'

Alok Soni
9th Feb 2015
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On July 10th 2014, the Finance Minister of India, Arun Jaitley, presented the most favorable budget for startups till date in the August house. This came more than a month after the announcement of creating of a new ministry of Skill Development and Entrepreneurship (MSDE). Then Minister of Youth Affairs and Sports (MoYAS), Sarbananda Sonowal, was assigned the independent charge of MSDE and with high hopes. The entrepreneurs were looking forward to the much needed support and participation from the government.

While there are certain developments with respect to the proposed outline for startups in India in last seven months, there is not much update on the Rs 10000 cr startup budget. Almost three months have passed since the Minister of State (Independent Charge) for Skill Development and Entrepreneurship Rajiv Pratap Rudy assumed charge of the newly-formed ministry. On Jan 31st, at Infosys campus, Bangalore, when asked about the progress of startup budget (while the minister was addressing the audience at Action for India conference on Skype), Rudy reiterated the government’s stance of July 2014. He said since the ministry was under Department of Youth Affairs & Sports earlier and started working independently very recently, he’s yet to figure out the source of funds. There are no plans how to spend the funds either and the ministry is keen to receive suggestions from the entrepreneurs themselves.


Startup-budget

While the government of India has inched towards transparency in its operations and functioning (Press Information Bureau (PIB) India has served as an effective medium to communicate the developments to the citizens); by far, the announcements and event participation by the ministers seems to overshadow the on-ground work and impact. Going back to the stated objective and functions of Ministry of Skill Development and Entrepreneurship, one realizes that they do not speak much about the entrepreneurship part either and talk about evolving an appropriate skill development framework, removal of disconnect between the demand for and supply of skilled manpower through vocational and technical training, skill up-gradation, building of new skills, mapping of existing skills and their certification etc.

Here are the major updates from the various department (and ministries of GoI) pertaining to the Indian startup ecosystem:

  • 10,000 cr startup fund for new businesses: No clarity and the MSDE is still figuring out (looking into it at the moment).
  • Schemes for Young Entrepreneurs: In a written reply in the Rajya Sabha, MSDE minister said, programmes like Industrial Motivational Campaigns, Entrepreneurship Development Programmes, Entrepreneurship-cum-Skill Development Programmes and Management Development Programmes are being undertaken through EDPs (IMC/EDP/ESDP/MDP) Scheme for young entrepreneurs. These programmes are conducted through 30 MSME Development Institutes. The ministry of MSME has three national level Entrepreneurship Development Institutes (EDIs) namely - National Institute for Entrepreneurship & Small Business Development (NIESBUD), NOIDA, National Institute for MSME (Ni-MSME), Hyderabad, and Indian Institute of Entrepreneurship (IIE), Guwahati, for conducting entrepreneurship & skill development activities covering the entire country. Apart from that there are 18 MSME Tool Rooms & Technology Development Centres which also conduct entrepreneurship & skill development programmes in the country.
  • National accelerators & incubators for startups to be setup: Few state governments have signed MoUs with NASSCOM on setting up incubation centres for startups but nothing at national level is reported as yet. Recently, National Skill Development Corporation (NSDC) and MSDE initiated a strategic partnership through a joint workshop with Wadhwani Foundation with the aim to catalyse skill development and entrepreneurship initiatives of the government .
  • 100 crore agri-infra fund – This has been allocated by the ministry of agriculture.
  • Definition of SME to be revised for high capital ceiling – MSME has not yet issued any update on this.
  • Rs. 200 cr for scheduled caste entrepreneurs – GoI launched ‘Venture Capital Fund for Scheduled Castes’ with initial capital of Rs. 200 cr where IFCI Ltd. will act as sponsor, settler and asset management company (AMC) / Nodal Agency to operate the scheme. The IFCI Ltd. would contribute Rs.50 cr which would comprise Rs.5.00 cr as sponsor and Rs. 45 cr as investor.
  • Ministry of textiles and Flipkart partnership: In order to provide better marketing reach, the Ministry has launched an e-commerce initiative with Flipkart. This will strengthen the existing Primary Weaver Cooperative Society by assisting entrepreneur from the weavers’ families for taking up production and supply directly to the customers.
  • Rs. 100 cr for startups in village (entrepreneurship for rural population): No updates from Ministry of Rural Development on this specifically.
  • Young Leaders Programme(YLP): In pursuance of the budget announcement, YLP has been set up with an investment of INR 100 crores by the Department of Youth Affairs and Sports.
  • Funds to stimulate biotech in India: No updates shared on this yet.
  • Entrepreneurs before retirement: A week before, Mr. Rudy discussed with the Defence Minister Manohar Parikkar about the training of JCOs and below rank army men in their 20th year of service, to turn them into entrepreneurs.

V Shankar, Member of The Chennai Angels commented on the startup fund,

The mechanics of operations of the fund, including the term, the composition between debt and equity, the manner in which proposals will be solicited and vetted etc is no clear. Also what would be the role for existing players such as Incubators, Accelerators, Angel Associations, VCFs etc. in this framework?

With almost 52 months in hand, it might be too early to write off the promises made by the Modi government and startups might just have to drop in their pace to be more considerate when it comes to the startup budget. But Rudy and his team have to toil to live up to the promises made to the Indian entrepreneurs and make the needle move.

In my recent interaction with secretaries of states, their eagerness to promote startups of their respective regions was evident and some of them already have a dedicated team of bureaucrats working on this. If this goes anywhere but northwards from here, I don’t know who to blame.

What do you think?

 

(image credits: shutterstock.com)

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