Scaling Up The Start-up Ecosystem Recommendations Of Standing Committee On Finance – Finance and Banking – India – Mondaq News Alerts

24 September 2020

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Recently, the Parliamentary Standing Committee on Finance(2019-20) (Committee) presented its Twelfth Report on the subject'Financing the Start-up Ecosystem' (the Report) to theHon'ble Speaker on 9 September 2020.

The Committee was tasked with the responsibility of recommendingmeasures to enhance the availability of the risk capital to thestart-up ecosystem in India with a particular focus onstrengthening the Indian financial system so that more domesticequity capital is available to scale up the start-up ecosystems forbuilding on the goal of Atmanirbhar Bharat.

During the sittings, the Committee acknowledged the importanceof the start-up ecosystem in developing an innovation-driveneconomy and its role in recovery of the economy during and postCOVID-19 pandemic. The various steps were taken by the Departmentfor Promotion of Industry and Internal Trade (DPIIT) throughdifferent government schemes since 2016 were also noted. TheCommittee also considered several representations made by theprivate equity (PE)/venture capital (VC) industry representativesas well as consulted relevant ministries, including the Ministry ofFinance (MoF) and Ministry of Commerce (MoC), Department ofEconomic Affairs (DEA), and various regulators in relation to therepresentations made.

Basis the above discussions, the Committee, in its Report, hasmade recommendations for the growth of finance to the start-upecosystem. The paragraphs hereunder discuss the key recommendationsmade by the Committee.

The above recommendations of the Committee echo thelong-standing demands from the PE/VC industry and should go a longway in providing the much-needed financing for start-ups topersevere throughout the COVID-19 pandemic. These recommendationscould mobilize domestic finance from PE/VC funds, banking andfinancial institutions, HNIs, and mature companies. Theserecommendations could also bring parity in commercial gains andtaxes imposed on the risks capital for start-ups, boost foreigninvestments in Indian start-ups and make India a more attractivejurisdiction for raising funds. Considering that the above measuresare required to mitigate the impact of the COVID-19 pandemic on thestart-up ecosystem, it would be pertinent that these measures areimplemented at the earliest.

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