Startup Policy Rundown: Crypto Ruling; UP Startup Policy 2020; FDI Norms Changed & More

The Indian startup ecosystem is said to be the third-largest in the world in terms of the number of startups. Recently, in response to the question asked in Lok Sabha, commerce minister Piyush Goyal said that the DPIIT has recognised 29,017 startups till February 26, 2020, an increase of 1,101 startups since February 1, 2020. He further said that out of the corpus of INR 10,000 Cr Fund of Funds, which is managed by the Small Industries Development Bank of India (SIDBI), the government has committed INR 3123.20 Cr to 47 SEBI registered Alternative Investment Funds (AIFs) — family offices, financial institutions and banks.

In addition to this, Goyal said that these AIFs have raised a corpus fund of INR 25,728 Cr and have invested a total of INR 3,378.47 Cr into 320 startups. Out of this investment, INR 912.91 Cr has been drawn from the Fund of Funds, he added. Further, the commerce minister said that Fund of Funds doesn’t invest directly into startups but provides capital to these AIFs, which invests in startups through equity and equity-linked instruments. Also, he said, as the startups are shortlisted by AIFs, there is no direct fund allocation from DPIIT to states or union territories under Startup India initiative.

According to NASSCOM report, Bengaluru (23-24%), Delhi (20-21%) and Mumbai (12-13%) are the top three startups hub in the country, nearly 55-58% of the startups are from these cities. Some of the key drivers of these startups hubs are said to be fuelled by initiatives like Startup India and Digital India, along with strong policy support, capital and availability of large talent base. State-wise, Gujarat, Karnataka, Kerala, Odisha and Rajasthan are among the top-performing states that have embarked startup-friendly policies.

Startup Policies In February 2020 

Here are some of the biggest startup-related policy updates from across the country.

Supreme Court Lifts Ban On Crypto Trading In India

The Supreme Court (SC) recently lifted the ban on cryptocurrency trading in the country which was banned since April 8, 2018, as per RBI directives. The crypto community in India was caught in the dilemma for two years now, as many companies had to shut shops because of RBI’s directives. But now, many experts believe that the decision of SC will boost the industry, thereby attracting more startups and investors.

Uttar Pradesh Govt Plans To Launch A New Startup Policy 2020

In a bid to break into the top three in domestic rankings by 2021, the Uttar Pradesh (UP) government is coming up a new ‘Startup Policy 2020.’ Under this new policy, the state government said to have a nodal officer across all the 75 districts to promote startups. Further, it also plans to partner with technical and educational institutions to propel the new business in the state. Commenting on the same, Yogi Adityanath, the chief minister of UP said that there are about 9 Mn micro, small and medium enterprises (MSMEs) in UP, there is a need for creating a framework that cultivates the culture of startups across sectors.

Punjab Govt To Set Up INR 100 Cr Startup Fund 

The Punjab government recently announced to set up of an INR 100 Cr fund for startups in the state. It also launched an agritech startup incubator called Kalkat Bhawan in partnership with IKG Punjab Technical University. Under this programme, the government will look into reimbursement of fees for 100 startups, every year, which will be sourced from the CSR funds available with the Punjab CSR authority.

At the TiECon Chandigarh event last month, Punjab finance minister Manpreet Singh Badal said that the cost incurred on executing the Article of Association (AoA) and memorandum of Association (MoA) while registering a company would be reimbursed by the state government. It is expected to spend around INR 10-15 Lakh per annum for the reimbursement initiative.

DPIIT Allows 100% FDI In Insurance Space

Paving a way for large scale foreign investments in the insurance space in India, DPIIT, the Ministry of Commerce & Industry has said to allow 100% FDI in insurance intermediaries. Under this new policy, the insurance intermediary which has a majority shareholding of foreign investors shall undertake measures including incorporation as a limited company under the provisions of the Companies Act 2013. In other words, the insurance company needs to have its base in India and at least one of the senior leadership board members should be a resident of India, be it CEO, MD and chairman. Previously, the policy allowed 49% FDI in the insurance sector, which includes insurance intermediaries.

India’s 30% Local Sourcing Norms For Retail 

Under the FDI policy, even though the Indian government has allowed 100% overseas investment. In the retail space, for the companies who are having FDI beyond 51% (as per SEZ Act 2005), the government has made it mandatory for sourcing 30% of the value of goods procured from India as a measure to ease transactions. Particularly, by single-brand retailers who procure goods from units in special economic zones (SEZ) to qualify towards meeting the mandatory local sourcing requirements.