A parliamentary panel on Tuesday made a case for a strong support system for financing the startup ecosystem to drive the economic revival post COVID-19.
The Standing Committee on Finance, chaired by BJP MP Jayant Sinha, also suggested that more sources of capital should be made available for startup financing and companies and LLPs should be allowed to invest in startups.
It said with adequate risk capital backing startups, they can provide innovative new services which can have a multiplier effect on the economy.
"The Committee believe and would urge that a strong support system to finance the startup ecosystem should be put in place to drive a sharp post-pandemic revival and sustainably high economic growth thereafter," it said.
The committee further said that under the current environment, given that the businesses are stressed for liquidity and valuations of companies have softened, there is a need to adopt a more pragmatic approach on applying fair market value principles in transactions between independent parties.
Hence, the panel said it strongly recommends that pricing guidelines prescribed under various laws and regulations by SEBI, Income Tax Act, Companies Act and Foreign Exchange Management Act (FEMA) should be made more consistent to provide a certain, coherent and simple framework for facilitating large-scale investments in India.
"The Department of Economic Affairs in the Ministry of Finance may set up an expert committee to provide pricing guidelines to government authorities," the panel recommended.
Meanwhile, 3one4 Capital Founding Partner Siddarth Pai said "these measures, if adopted, will help accelerate the Indian startup ecosystem and allow them to meet the PM's goal of startups contributing 20 per cent of India USD 5 trillion GDP by 2025."
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