Budget 2025: Finance Minister Announces Fund of Funds to Propel Startup Growth

At 11 p.m. Thursday, Finance Minister Nirmala Sitharaman gave the parliament a presentation of the Union Budget for 2025. The FM is proposing her budget for the eighth time, which is a record for Indian FM. The necessity of flexibility in policymaking has been emphasized a lot. The primary focus of the budget landscape for 2025 has been perceived to be taxes. The budget meeting is still in progress.

The FM, in her speech, said that focus is given to powering entrepreneurship. New Fund of Funds for Startups to be set up. Fresh contribution of another Rs. 10,000 crore, in addition to existing government contribution of Rs. 10,000 crore.

A new scheme will be introduced to support five lakh first-time entrepreneurs, specifically women, as well as individuals from Scheduled Castes and Scheduled Tribes.

Union Budget 2025: In-Depth Analysis for Strategic Insights, Click Here

GOALS:

• To provide term loans up to Rs. 2 crore during the next 5 years
• To provide online capacity building for entrepreneurship and managerial skills

Unlike direct government investment in startups, a fund of funds works differently. Instead of giving money straight to startups, the government channels it through venture capital ( VC ) firms and alternative investment funds ( AIFs ). These professional investors then decide which startups have the highest potential and provide them with the necessary funding.

This approach has been successful in the past. Alternate Investment Funds for startups, supported by Fund of funds, have received commitments of more than Rs. 91,000 crore.

The Fund of Funds is a strong step toward making India a global leader in startups and innovation. If implemented well, it will help new businesses overcome funding challenges, attract more investors, and create jobs across the country. However, careful execution and transparency will be key to ensuring its success.

Union Budget 2025: In-Depth Analysis for Strategic Insights, Click Here

Although this is a positive step, the actual effect will rely on how well the money is handled. Here are some issues to watch out for:

• Fast Fund Distribution: Startups may find it difficult to obtain funding when they most need it if there are administrative hold-ups.

• Fair and Open Allocation: The money must be distributed to worthy entrepreneurs without bias or poor administration.

• Reaching Outside of Large Cities: Smaller-town startups frequently have trouble obtaining funding. Promising companies outside of major cities should also have access to funding thanks to the fund.

The budget contains a comprehensive roadmap for the coming year. In her budget speech, the minister addressed the 6 sectors the Union budget is focusing on. The minister also said that she will be presenting the new Income Tax Bill next week.

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