Govt. may aid VCs to boost IT entrepreneurship
BANGALORE: The Indian government is mulling a proposal to give some funds to private venture capital (VC) companies to boost entrepreneurship in the country's IT sector.
The proposal of the IT ministry, if accepted by the finance ministry, would mean that the government would get its moderate rate of returns and the private venture capital companies could also get their returns on investment.
"Such a combination would mean decision making remains with the private VCs instead of getting bogged down by government rules and policies," said Rajeev Ratna Shah, secretary in the IT ministry, at The IndUs Entrepreneurs' Conference (TiECon) session in BangaloreIT.com 2002.
Currently, government venture funding goes only for the conventional sector because it is risk-averse unlike the private venture capital.
But current policies prevent an exit route for the government in the IT sector, an advantage that the private sector has.
Moreover, government funds cannot be given to an entrepreneur who has failed earlier, a factor that does not affect the private sector.
"Our proposal should help speed up private venture capital funding to entrepreneurs without two cultures being diametrically opposite of each other. The government would limit its exposure in such an arrangement to 30 per cent," Shah explained.
The IT department was also thinking that banks should not insist on small and medium IT enterprises providing physical collaterals like other sectors.
"The Reserve Bank of India should recognize that IT and IT-enabled services' contribution to India's GDP would be up seven per cent to 33 percent in five years. No other sector grows five times in such a short period of time," Shah said.
India's software export is expected to be up from the current $10 billion to $50 billion by 2008 and four million new people would get employment in this sector.
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