The Union Budget 2024 has left many startup enthusiasts feeling less than thrilled, especially those in the early stages. The government has decided to trim the budget for key schemes under the ‘Startup India’ initiative.
The Small Industries Development Bank of India (SIDBI)-operated Fund of Funds Scheme (FFS) took a hit in the budget. The allocation for FFS, which supports startups indirectly by providing capital to SEBI-registered Alternative Investment Funds (AIFs), was slashed to Rs 1,200 crore. This is a notable reduction from the previous year’s allocation of Rs 1,470 crore for the fiscal year 2023-24.
The FFS does not directly invest in startups. Instead, it helps other funds, ‘daughter funds’, invest in budding Indian startups using things like shares and similar financial tools. Another important part is the Credit Guarantee scheme, which makes sure that recognized startups get promises that their loans will be covered by different financial groups.
Surprisingly, the overall budget for the Startup India program has been cut down to a mere Rs 1 lakh, a stark drop from the substantial Rs 45.61 crore allocated in the previous budget. This downsizing occurs at a time when startup funding has experienced a 73 percent decline, hitting a five-year low in 2023.
Seed-stage funding has also taken a significant hit, plummeting by 60 percent to $678 million in 2023, compared to $1.7 billion during the same period in 2022, as reported by Tracxn data.
However, not all hope is lost. The government has allocated Rs 175 crore for the Startup India Seed Fund Scheme (SISFS) in the Interim Budget for 2024-25.
Although this is a 9 percent increase from the previous year’s allocation of Rs 160 crore, concerns linger among startup circles. The SISFS, launched under the “Startup India” initiative in April 2021, started with a corpus of Rs 945 crore spread over four years until 2025.
The fund received Rs 100 crore in its inaugural year, followed by allocations of Rs 140 crore and Rs 160 crore (revised) in the Union Budgets for 2023 and 2024, respectively. To ensure effective execution and monitoring of the fund, the government has put in place an expert committee (EAC). The EAC evaluates and selects incubators for fund allocation, and these incubators, in turn, shortlist startups for capital injection.
