Govt. Launches India Aspiration Fund & Make in India Loans for Indian Startups, SMEs; Allocates Rs.12000 Cr
PM Modi thundered “Start-up India, Stand up India” during his Independence Day speech in Delhi, in order to inspire more Indians into entrepreneurship. The best part is that, the talks are transforming into concrete action.
In a new push for assisting startups and SMEs, Govt. has launched two new investment and loan programs with a combined budget allocation of Rs 12,000 crore.
Minister of State for Finance Jayant Sinha said while announcing these programs, “India is expected to surpass the UK in terms of number of startups launched and would be behind only to the US. There is need for more funds that focus on startups and growth stage MSMEs,”
Both of these programs will be supported and managed by Small Industries Development Bank of India (SIDBI).
India Aspiration Fund
Finance Ministry launched a unique investment program, described as ‘fund of funds’, which will invest in various VC funds for meeting the equity requirement of MSME start-ups. Hence, instead of directly funding in startups, India Aspiration Fund (IAF) will help the VCs to come up with newer investment ideas and protocols.
Besides infusing crores of funding into SMEs, this will also create lakh of new jobs.
In a statement, SIDBI described the objective of IAF to “catalyze tens of thousands of crores of equity investment into start-ups and MSMEs (micro and small enterprises), creating employment for lakhs of persons, mostly educated youth, over the next four to five years,”
Life Insurance Corporation of India (LIC) will be a co-investor in IAF.
This new announcement of IAF is being linked with the news we reported in February, wherein RBI had announced a corpus of Rs 2000 crore for Indian startups.
As per SIDBI chairman and managing director Kshatrapati Shivaji, Rs.753 crore out of Rs. 2,000 crore has already been committed under IAF to various VCs, which include: IvyCap Ventures (Rs 60 crore), Blume Ventures (upto Rs 30 crore) and Carpediem Capital Partners (Rs 20 crore).
Govt. has roped in veterans of entrepreneurship world to manage IAF: Harkesh Mittal, Secretary, Technology Development Board, Manipal Global Education Chairman TV Mohandas Pai, Info Edge founder Sanjeev Bhikchandani, former Nasscom chairman Kiran Karnik and Indian Angel Network cofounder Saurabh Srivastava are some of the members who will devise strategies to optimally utilize this fund.
SIDBI Make in India Loan for Small Enterprises (SMILE)
In association with SIDBI, Govt. has launched another innovative loan program for SMEs, named as SIDBI Make in India Loan for Small Enterprises (SMILE). A budget of Rs 10,000 crore has been earmarked for SMILE.
Focused on the 25 sectors under PM Modi’s Make in India vision, SMILE will offer quasi-equity and term based short term loans to Indian SMEs which will have less stringent rules and regulations.
Together, these two Govt. initiated programs will help to create more than 20 lakh direct and indirect jobs in the country.
Another Govt. scheme called Micro Units Development and Refinance Agency (MUDRA Bank) is already under process, wherein Rs 20,000 crore has been earmarked for developing startups in India.
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Great initiative by the government of India. It is interesting to see that government is including startups along with SMEs now. A Fund of fund approach will accelerate the funding activity to a very great extent. We see hundreds of startups and SMEs register with us(SMERGERS) every month in search of investors and lenders. Initiatives like these will benefit businesses immensely.