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Ankit Kedia

Founder and Lead Investor, Capital A

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Investors Unwilling To Fund Startups, Continue To Focus On Course Correction

Since all the VCs are accountable for the money they put into the ecosystem, focusing on ROI and viability or right-sizing of investments should not be seen as a funding winter. In fact, a number of unicorns have still managed to join the club this year

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The Indian economy has proven to be highly resilient and adapted to fluctuating market conditions especially in the wake of scenarios like the Russia-Ukraine war. On the investments front, there has been a visibly guarded approach by PEs and VCs in the year gone by. 

The focus shifted from the valuations to profitability and there is a greater tendency to support early-stage startups than investing in late-stage companies. Contrary to the perception that investors have suddenly started pulling back from the market, and are unwilling to fund startups this year, they have only been focusing on a course correction. 

Since all the VCs are accountable for the money they put into the ecosystem, focusing on ROI and viability or right-sizing of investments should not be seen as a funding winter. In fact, a number of unicorns have still managed to join the club this year, and there is no doubt that the growth story for Indian investors and startups will continue in the times ahead.

However, the investor community is also mindful of the changing scenarios, and it expects the government to take adequate fiscal and policy initiatives to support the sunshine sectors. Some of the main industry verticals that need such support are as follows.

Logistics and supply chains – For a country like India that aims to become a global manufacturing hub in the years ahead, it is crucial to build robust logistics and supply chain guidelines. Simplification of the GST regime is one of the key demands of the segment alongside establishment of logistics parks and supportive infrastructure. At present, logistics operators need to undergo multiple audits across states and this is something that the Union Budget is expected to address.

Climate Tech development – Climate change is one of the biggest existential challenges for the world, and it is a major threat that can derail India’s future growth if not given adequate focus. The Government has made commendable progress through policy initiatives and now, development of advanced tech in renewable power generation, energy efficiency, green construction, EVs and battery design has to be encouraged. 

To achieve India’s medium and long-term emission control goals, significant investments are needed year-after-year. Setting up of thematic funds focusing on various climate-tech areas, and greater participation from Indian investors is needed in this arena.

Electric vehicles – Electric vehicles are the future of mobility and one of the key sectors that require heavy investment consistently for several years to come. However, for the industry to grow at the desired pace, it is essential that necessary financial as well as policy benefits are provided to the EV sector. In the last Union Budget, the finance minister had announced the formulation of Battery Swapping Policy and the draft has been in the public domain for several months now. It is expected that the upcoming Union Budget would address the concerns raised by the industry stakeholders regarding the battery standardization, subsidies, taxation and operational procedures, and pave the way for a speedier transition to EVs in the country.

Conclusion

India is at the cusp of an economic revolution and the Union Budget 2023/24 is expected to provide the fiscal and policy impetus to ensure better and faster growth for the sunshine sectors.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house


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