The government will lift a ceiling on investment classes to a maximum of Rs 1 lakh per person and will allow firms to set aside more funds in their own accounts to fund new ventures.
The government on Wednesday announced a plan to provide incentives to firms to invest in India’s emerging and non-traditional industries, including small and medium enterprises (SMEs), tech start-ups and even small startups that are not yet registered in the country.
The move is expected to help firms invest in the capital markets, said Rakesh Agarwal, president of the Nasscom India Investment Council, which represents major investment firms.
The industry body has proposed that the government could allow the creation of up to Rs 1.5 lakh crore in a fund to be called the “Uninvested Fund” to encourage investment in emerging and new sectors, as well as in the existing ones.
The funds would be set up by the finance ministry and would be administered by the Investment Corporation of India (ICI).
“The government should ensure that firms are not only able to invest at the minimum, but also at the maximum,” Agarwa said.
India’s total stock of uninvested funds stood at Rs 12.8 lakh crore at the end of April, according to the National Stock Exchange.
This is a sharp drop from the previous year, when the government had allowed firms to create funds up to $50 million.
The fund would be limited to investment in “start-ups, SMEs and non industrial businesses,” which were not yet set up in India.
The decision comes as the government struggles to meet its goal of doubling its GDP by 2020.
Its goal of 1.25 lakh crore by 2020 is the lowest in the world, according the International Monetary Fund.
The target was reached by the government in 2015.