In order to boost the startup ecosystem in the country, finance minister Arun Jaitley has announced the launch of India Aspiration Fund (IAF) with an initial corpus of Rs. 2,000 crore. IAF is managed by Small Industries Development Bank of India (SIDBI) for promotion, financing and development of micro, small and medium enterprises (MSME) sector.
Jaitley also launched the SIDBI Make in India Loan for Small Enterprises (SMILE) Scheme with an allocation of Rs. 10,000 crore.The loan scheme’s focus will be on 25 sectors under government’s ‘Make in India’ programme with an emphasis on financing smaller enterprises within the MSME sector.
“India is witnessing a startup revolution and to harness the potential of India’s innovators and entrepreneurs a vibrant financial ecosystem is essential. IAF will play a vital role in this financial ecosystem,” said Arun Jaitley. He also mentioned that the fund is expected to catalyze tens of thousands of crore of equity investment in startups and MSMEs, creating employment for lakhs of people over the next 4-5 years. Life Insurance Corporation has also agreed to be a partner and co-investor in the IAF.
Rs.753 crore of the Rs.2,000 crore ($305M) seed capital has already been sanctioned for the equity fund and disbursements have started. The total Rs.2,000 crore of seed capital can be leveraged to raise Rs.25,000 crore ($3.8B).
As per Securities and Exchange Board of India (Sebi) chairman U.K. Sinha, $15 billion came into the country in 2014 as venture capital and private equity and in the year 2013, the figure was $13 billion.
In 2014, Arun had also unveiled a $1.6 billion fund to support startups in India, but it has not been converted to concrete result yet.