DPIIT To Seek Cabinet Nod For National Seed Fund, Credit Scheme

In a bid to strengthen India’s position in the global startup ecosystem, the Department for Promotion of Industry and Internal Trade (DPIIT) is working on a National Seed Fund and a credit guarantee scheme. 

An Economic Times report citing an official said that DPIIT is in an advanced stage of work for the Cabinet note for the two schemes. The report added that the National Seed Fund seeks to support ideation and development of early-stage startups while the credit guarantee scheme will enable startups to raise loans easier.

The schemes are said to be part of the country’s broader roadmap for startups and the overall vision for the sector will detail the priority areas that need support. “The revenue implications of the two schemes are being assessed,” the report added.

The Indian government envisions to take the country to the top 50 in the global Ease of Doing Business rankings. India managed to improve its rank for EoDB from 77th position in 2019 to 63rd in 2020 as mentioned in World Bank’s Doing Business 2020 report.

In the Union budget 2020-21, finance minister Nirmala Sitharaman had called on Indian entrepreneurs and said that entrepreneurship has always been the strength of India and proposed a seed fund.

“We recognise knowledge skills and risk-taking capabilities of youth. They are not job seekers, but job creators,” Sitharaman said. In part two of the government’s plan for 2020 in the Union budget, the minister revealed the plans to set up a seed fund for early-stage startups.

“The government proposes to provide early life funding, including a seed fund to support ideation and development of early-stage startups,” the minister said during the presentation of Union budget 2020.

The Modi government in its election manifesto had announced plans to create an INR 20K Cr Seed Fund. The announcement has brought cheer to the Indian startup ecosystem, as the government joins the industry in its efforts to support the early-stage startup ecosystem with funding.

When it comes to early-stage seed funding, the Indian startup ecosystem is going through a slowdown. In 2019, the seed stage funding continued to fall. With $252 Mn in funding, the seed-stage deal value fell by 44% (compared to 2018) as only 306 seed funding deals were recorded.

Further, with the disastrous impact of Covid-19, the Indian startup funding is further expected to be hit. Hence, these two new schemes can be part of a bailout package Indian startup ecosystem has been seeking from the government.