Worried Startups Seek Bailout Package and Exemption from FDI Curbs

The Startup India Association or (SIA) has requested the government to exempt startups from the foreign direct investment curbs placed on investors from neighbouring nations. SIA is an advocacy group representing the Indian startup community ecosystem. China is one of the neighbouring nations which has been investing in the Indian for many years now.

This comes after India tweaked its FDI policy after China’s central bank raised an equity stake in HDFC above 1 per cent. The change in policy is aimed at curbing opportunistic takeovers of Indian firms amid the COVID-19 crisis.

Therefore, India made some changes to keep an eye on investments from neighbouring countries including China. According to the new policy, any investment from neighbouring countries, including China, will now need prior government approval.

China's VC Investments in Indian Startups

The already struggling Indian Startups amid Covid-19 are worried about the outcome after this change in the policy. SIA, in a letter to commerce minister Piyush Goyal, said that foreign investors have put in around $82.1 billion into the Indian startup ecosystem in the last five years. Chinese investors alone have contributed to the tune of over $8 billion.

The concern of the SIA is genuine as the Chinese venture funds are one of the biggest backers of Indian technology startups. It may be noted that the Chinese Ventures like Alibaba, Tencent, Fosun RZ Capital, Shunwei Capital, and many others have backed the Indian companies. Some of them include the successful startups like Paytm, Zomato, Ola, Byju’s, OYO, Delhivery, Swiggy, Rivigo, Ixigio. There are other emerging startups such as Rapido, ShareChat, Trell, LetsTransport and more funded by Chinese VC.

Besides urging the government to ease the FDI norms, the SIA also requested the Minister and DPIIT for a bailout package. The association urged them to set-up a Rs 25,000 crore Startup India Fund. It will help the “running out of cash” startups as the VC funding have also dried up during Corona pandemic.


Furthermore, SIA also warned the government that without any support, startups may wind up and may also cut employee numbers. As a result thousands of people may lose jobs in India.