Startup credit guarantees, fund of funds scheme becoming 'rozgardata' for youth, says FM Nirmala Sitharaman in Budget speech

Finance Minister Nirmala Sitharaman

Startup credit guarantees and the Small Industries Development Bank of India (SIDBI) fund of funds scheme launched by the government are helping generate employment opportunities for the country's youth, Finance Minister Nirmala Sitharaman said while presenting the interim Budget 2024.

"Startup credit guarantees, fund of funds scheme are assisting our youth and becoming 'rozgardata'," the finance minister said.

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The Fund of Funds for Startups (FFS) Scheme was approved and established in 2016 with a corpus of Rs 10,000 crore, with contribution spread over the 14th  and 15th Finance Commission cycle based on progress of implementation, to provide much-needed boost to the Indian startup ecosystem and enable access to domestic capital.

Under FFS, the Scheme does not directly invest in startups, instead provides capital to SEBI-registered AIFs, known as daughter funds, who in turn invest money in growing Indian startups through equity and equity-linked instruments. SIDBI has been given the mandate of operating this fund through selection of suitable daughter funds and overseeing the disbursal of committed capital. AIFs supported under FFS are required to invest at least 2 times of the amount committed under FFS in startups.

Under the Startup India initiative, the government is constantly undertaking various efforts for the development and growth of startup ecosystem in the country.

The flagship schemes namely, Fund of Funds for Startups (FFS), Startup India Seed Fund Scheme (SISFS) and Credit Guarantee Scheme for Startups (CGSS) are supporting startups at various stages of their business cycle to enable startups to graduate to a level where they will be able to raise investments from angel investors or venture capitalists or seek loans from commercial banks or financial institutions.

The government also implements flagship annual exercises and programs including States’ Startup Ranking, National Startup Awards and Innovation Week which play an important role in holistic development of the startup ecosystem.

The government through stakeholder consultations seeks regulatory and policy related recommendations for enhancing ease of doing business and reducing compliance burden for startup ecosystem. The government also facilitates participation and engagement of Indian startup ecosystem at international platforms.