Government To Invest Rs 2,200 crore In Electronic Technology Start-ups

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The Centre is targeting an investment of about Rs 2,200 crore by 2019 in start-ups working on new technologies in the electronic sector under the Electronics Development Fund (EDF), a senior government official said.

#DigitalErra Thought Corner

What is EDF?

The EDF is a ‘fund of funds’ that works with venture capitalists to create funds, known as ‘daughter funds,’ which provide risk capital to companies developing new technologies in the area of electronics, nano-electronics and IT.

It would put in 10% of the capital in ‘daughter funds’ and the rest would be invested by venture capitalists. Hence, a targeted investment of Rs 2,200 crore by the government will help mobilize Rs 22,000 crore for the ‘daughter funds,’ which will then invest primarily in start-ups.

“One of the major issues that we have had in India is that we have not had big VC funding coming in,” IT Secretary Aruna Sundararajan said. “Mostly it has gone into e-commerce and e-tailing. That is not enough. We need to create IPR also. To create IPR. There are a large number of tech start-ups, people working in nano-technology etc. but the problem is who will fund them, because it is almost like R&D, until they commercialize,” she added.

Aim of the EDF

The aim of the EDF was to move from a government-funded model to private-funded model where a start-up can raise money from the market. The idea is to seed the market. The interest of government in a startup funding will significantly build a certain degree of confidence in the investors who put money into the venture fund.

How much money has been put till date?

The government had been able to mobilize Rs 6,870 crore, of which the government’s share has been Rs 687 crore. It plans to increase the amount up to Rs 22,000 crore by 2019, of which centre’s share will be Rs 2,200 crore.

The fund is an attempt to develop the electronics system design and manufacturing sector in the country to achieve “net zero imports” by 2020.

Some more initiatives

Adoption of high-end technology devices, transitions such as roll out of 4g/LTE networks and Internet of Things (IoT) are driving accelerated adoption of electronics products. Government of India has treated the electronics sector as a priority under its “Make in India” program. It has several programs such as Digital India, Smart Cities, cloud initiative, solar power and UIDAI projects and National Knowledge Network initiative, which will boost the domestic consumption of electronics content.

Electronics Giants Keen To Invest In India

Global electronics giants like Foxtone, Apple and others are keen to invest in India. Earlier this month, Apple Inc CEO Tim Cook said the company was in discussions on a number of things in India, including opening retail stores. Also, Panasonic will also establish the India R&D Center in Appliances Company India consisting of two technical divisions to accelerate the product development and to realize locally fit products.

Similarly, Samsung Electronics is planning to invest $296 million over the next three years so it can double its manufacturing power in India amid fears of sales slowing down in today’s fast-growing smartphone industry. “In line with our commitment to ‘Make in India’, we are pleased to receive the Uttar Pradesh Government’s approval to invest in the state and expand our manufacturing base here in India,” said Samsung India President and CEO HC Hong.

State of Electronics Industry

The investments in electronic manufacturing, which was just Rs 11,000 crore in June 2014, has increased to Rs 1,27,880 crore and from 6 crore mobile handsets in 2014-15, India’s mobile manufacturing capacity has increased to 11 crore in 2015-16.

“With 72 new mobile handset and component manufacturing units set up in last two years, India has emerged as a mobile manufacturing hub. This includes 42 mobile manufacturing units and 30 component makers in the mobile phone segment,” Law and IT minister Ravi Shankar Prasad said.

He added that electronics production in the country has increased across segment with value of LED products registering an increase of 65 per cent to Rs 3,590 crore in 2015-16 from Rs 2,172 crore in 2014-15.

“Value of mobile handsets produced in India has increased by 185 per cent to Rs 54,000 crore in 2015-16 from Rs 18,900 crore in 2014-15. Next year, it is going to cross Rs 90,000 crore,” Prasad said.

Conclusion

Incubation of technology startups that specialize in electronics will encourage local manufacturing and limit import of electronic merchandise, country’s second-biggest foreign exchange-drainer after oil. Funding assistance by government is a step in the right direction, especially as electronics-focused startups need high initial investment.

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