At a time when tech start-ups are struggling to get funding from private equity and venture capital firms, Union Finance Minister Nirmala Sitharaman announced on Thursday ₹1 trillion corpus to help finance research in technology.
“For our tech-savvy youth, this will be a golden era. A corpus of ₹1-lakh crore will be established with fifty-year interest free loan. The corpus will provide long-term financing or refinancing with long tenors and low or nil interest rates. This will encourage the private sector to scale up research and innovation significantly in sunrise domains.,” she said in her speech.
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Welcome move
Experts welcomed this announcement. “It is very timely, because we are going through a funding winter. If it actualises, there is nothing like it, especially as there is a crackdown from the government on Chinese funding for start-ups such as Paytm. There are many nuances that the Centre will have to consider while drafting the comprehensive scheme. There cannot be too many changes to the scheme if start-ups wish to see the government as a reliable partner. Moreover, most tech start-ups will not have collateral, which the Centre will also need to take into consideration. It will also be a major risk on the government’s part, if the start-up goes through extensive devaluation, this is another nuance that the government will have to take measures of,” Sanchit Vir Gogia, Chief Analyst, Founder and CEO of Greyhound Research explained. “
A potential corpus to rejuvenate research and funding into the tech ecosystem will be welcomed by the tech start-up sector, especially as funding has been hard to come by in recent years. The funding winter of 2023 was chilling in particular as tech start-up funding shrunk by 60 per cent to $10 billion. A ₹1 trillion corpus will be welcomed in these circumstances, however, experts believe that certain nuances must be considered.
Finance Minister also said that a new scheme will be announced “to strengthen deep tech technologies for defence purposes and Atma Nirbharta”.
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Fillip to sector
Ashish Aggarwal, Head of Public Policy at nasscom a think tank for tech companies added, “As per nasscom’s report on deep-tech start-ups (August 2022), there are more than 3,000 deep tech start-ups in India, witnessing a 53 per cent growth in the last 10 years. Access to long-term patient capital is key in supporting the growth of deep-tech start-ups. The announcements in the Budget to provide long-term financing and re-financing at low or nil interest rates in sunrise domains is likely to provide the required fillip to this sector.”
In addition to tech sector, the funding could help other sectors like pharma. Satish Reddy, Chairman, Dr. Reddy’s Laboratories Ltd said, “The ₹1-lakh crore R&D allocation for sunrise sectors can potentially act as a catalyst in our innovation journey as the Indian pharma industry aims to reach $120-130 billion by 2030.”
(With inputs from Naga Sridhar in Hyderabad)