On Saturday, the Government announced that foreign direct investment from neighbouring countries would now have to be approved. This move comes when there is an increase in investments from Chinese companies across the world. China has slammed the Indian government’s move as “discriminatory” and asked for "revision of discriminatory practices".
Startup industry experts find this step leading to drying up of investments in India. “While the government has previously taken commendable initiatives to revive the startup community, the revised FDI policy comes as a shock. We do appreciate the government’s aim to curb opportunistic investors from our neighbouring countries, but it could have waited. Many startups are in dire need of early-stage funding, and the latest move will create an additional barrier between them and foreign investors,” said Dr Apoorv Ranjan Sharma, Co-Founder and Managing Director, 9Unicorns, an early-state startup incubator.
In a recent report of Indian Council on Global Relations, Indian tech startups have received $4 billion in investments. While there are a plethora of Chinese applications used on the Indian soil, investments from China make up to $6.2 billion overall, the report said.
The COVID-19 crisis has unsettled India’s startup and investor communities alike. The nationwide lockdown and the ban on non-essential services have resulted in a sluggish economy, which in turn has slowed down funding activities in the startup space. The unprecedented crisis has caught entrepreneurs and startup leaders completely off-guard, many of whom are struggling to stay afloat due to little to no incoming cash flow,” said Sharma.
When asked to comment a few investment firms including Avana Capital, Blume Ventures and Innoven Capital refused stating no reason. Indian startups that have received investments include BigBasket, Paytm, Snapdeal, Ola, Swiggy among others.
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