The Union Budget for 2024 has not brought much cheer for startups, particularly early stage, as government cuts budget for major flagship schemes under 'Startup India' initiative.
In the Budget, there has been a reduction in the allocation for the Small Industries Development Bank of India (SIDBI)-operated Fund of Funds Scheme (FFS). The allocation for FFS was cut down to Rs 1,200 crore, compared to the previous allocation of Rs 1,470 crore for the fiscal year 2023-24.
Under FFS, the scheme does not directly invest in startups, instead provides capital to SEBI-registered Alternative Investment Funds (AIFs), known as daughter funds, who in turn invest money in growing Indian startups through equity and equity-linked instruments.
Meanwhile, the Credit Guarantee scheme for startups works towards providing credit guarantees to loans extended to DPIIT recognised startups by Scheduled Commercial Banks, Non-Banking Financial Companies (NBFCs) and Venture Debt Funds (VDFs) under SEBI registered Alternative Investment Funds.
The overall budget for Startup India programme has been brought down to mere Rs 1 lakh, from a high of Rs 45.61 crore in the previous budget.
The limited allocations comes at a time when start-up funding has been dropped 73 percent reaching a five-year low in 2023.
Seed-stage funding also took a hit of 60 percent this year, dropping to $678 million in 2023 to date from $1.7 billion in the same period in 2022, Tracxn data shows.
Startup India Seed Fund Scheme gets Rs 175 crore
The government has allocated Rs 175 crore for the Startup India Seed Fund Scheme (SISFS) in the Interim Budget for 2024-25 to provide financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialisation.
The allocation, however, is mere 9 percent higher from Rs 160 crore the government earmarked for last year.
The government had rolled out the flagship scheme under the "Startup India" initiative in April 2021, with a corpus of Rs 945 crore spread over four years (till 2025).
The fund received Rs 100 crore in its first year followed by an allocation of Rs 140 crore and Rs 160 crore (revised) in the Union Budgets 2023 and 2024, respectively.
The government has constituted an expert committee (EAC) which is responsible for overall execution and monitoring of the fund.
The EAC evaluates and selects the incubators for allocation of funds, who further shortlist the startups for the capital.
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