**Executive Summary**
This document is the response to unstarred question number 2720 in Lok Sabha regarding the cash crunch faced by start-ups and MSMEs. The Minister of State in the Ministry of Commerce & Industry outlines the government's assessment, actions taken, and proposed schemes to address the funding challenges in the start-up ecosystem and the MSME sector. It references data up to October 31st, 2025 and covers initiatives operationalized since 2021.
**Key Points / Main Content**
* **Assessment of Cash Crunch and Investment Trends:**
* The AIF market in India has matured significantly, fueled by a thriving startup ecosystem.
* AIF commitments have increased threefold, reaching Rs. 11.3 lakh crore by the end of 2023-24.
* **Government Initiatives and Schemes:**
* The Government has established the Fund of Funds for Startups (FFS), operationalized by SIDBI, to catalyze venture capital investments.
* AIFs supported under FFS must invest at least two times the committed FFS amount in startups.
* The entire corpus of Rs. 10,000 crore has been committed to AIFs, catalyzing investments of Rs. 24,919.5 crore into 1,334 startups as of October 31st, 2025.
* The Self-Reliant India (SRI) Fund infuses equity into MSMEs, with Rs. 10,000 crore from the Government and Rs. 40,000 crore through private funds.
* 671 MSMEs have been assisted with an equity infusion of Rs. 14,927 crore since 2021 till October 31st, 2025.
* The Startup India initiative includes the Fund of Funds for Startups (FFS), Startup India Seed Fund Scheme (SISFS), and Credit Guarantee Scheme for Startups (CGSS).
* The SISFS provides financial assistance to seed-stage startups through incubators; Rs. 945 crore has been approved to 219 incubators as of 31st October 2025.
* The CGSS enables collateral-free loans to startups; Rs. 755.25 crore have been guaranteed for startup borrowers as of 31st October 2025.
* The Credit Guarantee Scheme (CGS) for MSEs, provides credit guarantee for loans up to Rs 10 crore.
* The Prime Minister's Employment Generation Programme provides Margin Money subsidy.
* The PM Vishwakarma Scheme provides support to artisans and craftspeople, including loans up to Rs.3 lakh.
* The Government implements exercises and programs including States' Startup Ranking, National Startup Awards, and Innovation Week.
* The Atal Innovation Mission (AIM) fosters innovation and entrepreneurship.
* The Scheme for Innovations for Defence Excellence (iDEX) and Acing Development of Innovative Technologies with iDEX (ADITI) are fostering innovation and technology development in defence and aerospace.
* The Research, Development, and Innovation (RDI) Scheme incentivizes private sector participation in research and development.
* The Department of Biotechnology (DBT) has established biotechnology incubation and pre-incubation centres.
* The Ministry of Skill Development and Entrepreneurship (MSDE) has taken various initiatives to promote entrepreneurship development.
**Impact Analysis**
**Startups and MSMEs**
* **Impact:** Benefit from increased access to funding, credit facilities, and incubation support through various government schemes and initiatives.
* **Action Required:** Explore and apply for relevant schemes to access funding and support for growth and innovation.
**Investors (Including AIFs and Venture Capital Funds)**
* **Impact:** AIFs are influenced by government requirements to invest a certain amount under FFS, and will benefit from a more vibrant startup ecosystem.
* **Action Required:** Align investment strategies with government schemes to capitalize on opportunities and contribute to the growth of the startup ecosystem.
**Incubators**
* **Impact:** Benefit from financial assistance through SISFS to support seed-stage startups.
* **Action Required:** Apply for SISFS funding and provide comprehensive support to incubated startups.
**Financial Institutions**
* **Impact:** Eligible financial institutions participating in CGSS can offer collateral-free loans to startups.
* **Action Required:** Operationalize CGSS to facilitate lending to startups without collateral.
**Artisans and Craftspeople**
* **Impact:** Receive end-to-end holistic support, including loans, through the PM Vishwakarma Scheme.
* **Action Required:** Apply for the PM Vishwakarma Scheme to access financial assistance and support for their trades.
Key Entities Referenced
Fund of Funds for Startups (FFS): A scheme established by the Government of India to catalyze venture capital investments in startups, operationalized by SIDBI.
Alternative Investment Funds (AIFs): Privately pooled investment vehicles used by various investors to channel venture capital and private equity into startups, regulated by SEBI.
Startup India: A Government of India initiative encompassing flagship schemes like FFS, SISFS, and CGSS to support startups.
Ministry of Commerce & Industry: The primary ministry responsible for addressing the cash crunch faced by startups and MSMEs and promoting the startup ecosystem.
Self-Reliant India (SRI) Fund: A fund set up by the Government of India to infuse equity into Micro, Small and Medium Enterprises (MSMEs).
GOVERNMENT OF INDIA
MINISTRY OF COMMERCE & INDUSTRY
DEPARTMENT FOR PROMOTION OF INDUSTRY AND INTERNAL TRADE
LOK SABHA
UNSTARRED QUESTION NO. 2720.
TO BE ANSWERED ON TUESDAY, THE 16TH DECEMBER, 2025.
CASH CRUNCH FACED BY START-UPS AND MSMES
2720. SHRI TARIQ ANWAR:
Will the Minister of COMMERCE AND INDUSTRY be pleased to state:
वाणिज्य एवं उद्योग मंत्री
(a) whether the Government has made any assessment of the cash crunch
situation being faced by start-ups and small and medium enterprises in the
country, if so, the details thereof;
(b) whether there has been a significant decline in investment in the MSME sector
during the Financial year 2023-24, if so, the response of the Government and
action taken in this regard;
(c) the concrete steps taken by the Government to address the funding crunch and
"funding winter" in the start-up ecosystem; and
(d) whether the Government proposes to introduce any new schemes to facilitate
credit facility and encourage investment for these enterprises, if so, the details
thereof?
ANSWER
वाणिज्य एवं उद्योग मंत्रालय में राज्य मंत्री (श्री णिणिन प्रसाद)
THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY
(SHRI JITIN PRASADA)
(a) to (d): In India, Alternative Investment Funds (AIFs), which are privately pooled
investment vehicles, are utilized by various investors to channel venture capital
and private equity into startups. As per the Securities and Exchange Board of
India (SEBI) Annual Report 2023-24, the AIF market segment in India has
matured significantly. Several factors, including India's thriving startup
ecosystem, supportive regulatory framework, a steadily growing pool of
domestic investors, and unique investment opportunities with potentially higher
returns, have fuelled the growth of AIFs. Specifically, the commitments raised
by AIFs have seen three- fold increase, reaching Rs. 11.3 lakh crore at the end
of 2023-24 from Rs. 3.7 lakh crore at the end of 2019-20.
The Government has established the Fund of Funds for Startups (FFS) to
further catalyze venture capital investments. It is operationalized by Small
Industries Development Bank of India (SIDBI), which provides capital to SEBI-
registered Alternative Investment Funds (AIFs) which in turn invest in startups.AIFs supported under FFS are required to invest at least two times of the
amount committed under FFS in startups. The entire corpus of Rs. 10,000 crore
has been committed to AIFs which have catalysed investments of Rs.
24,919.5 crore into 1,334 startups under the Scheme as on 31st October 2025.
The Government has also set up the Self-Reliant India (SRI) Fund to infuse
equity of Rs. 50,000 crore in Micro, Small and Medium Enterprises (MSMEs)
having potential and viability to grow larger with Rs. 10,000 crore from the
Government of India and Rs. 40,000 crore through Private Equity/Venture
Capital Funds. Since inception in 2021 till 31st October 2025, 671 MSMEs have
been assisted with an equity infusion of Rs. 14,927 crore.
The Government has taken several other initiatives and measures to support
startups and Micro, Small and Medium Enterprises (MSMEs) and improve
access to finance, facilitate credit facility and encourage investment for these
enterprises. Details of the measures are placed as Annexure-I.
********ANNEXURE-I
ANNEXURE REFERRED TO IN REPLY TO PARTS (a) to (d) OF THE LOK SABHA
UNSTARRED QUESTION NO. 2720 FOR ANSWER ON 16.12.2025.
Key measures undertaken by the Government to promote the startup ecosystem
are as follows:
1. Under the Startup India initiative, the flagship Schemes namely, Fund of Funds
for Startups (FFS), Startup India Seed Fund Scheme (SISFS) and Credit
Guarantee Scheme for Startups (CGSS) support startups at various stages of
their business cycle.
2. SISFS provides financial assistance to seed stage startups through incubators.
SISFS is implemented from 1st April 2021. Under the SISFS as well the entire
corpus of Rs. 945 crore has been approved to 219 incubators as on 31st October
2025.
3. CGSS is implemented for enabling collateral free loans to startups through eligible
financial institutions. CGSS is operationalized by the National Credit Guarantee
Trustee Company (NCGTC) Limited and has been operationalized from 1st April
2023. Under CGSS, 311 loans amounting to Rs. 755.25 crore have been
guaranteed for startup borrowers as on 31st October 2025.
4. Ministry of MSME implements Credit Guarantee Scheme (CGS) for MSEs through
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to
provide credit guarantee for loans (revised to loans upto Rs 10 crore w.e.f
01.04.2025) to new as well as existing MSEs without collateral security and third-
party guarantee.
5. Prime Minister's Employment Generation Programme provides Margin Money
subsidy up to 35%, for setting up of new micro enterprises, in the non-farm sector
with project cost of Rs. 50 lakh for Manufacturing and Rs. 20 lakh for Services
enterprises.
6. PM Vishwakarma Scheme was launched on 17.09.2023 to provide end-to-end
holistic support to artisans and craftspeople of 18 traditional trades who work with
their hands and tools. The Scheme includes provision of loans up to Rs.3 lakh
with interest subvention of max up to 8%.
7. The Government also implements periodic exercises and programs including
States’ Startup Ranking, National Startup Awards, and Innovation Week which
play an important role in the holistic development of the startup ecosystem. The
Government also encourages and supports ecosystem-led initiatives such as
Startup Mahakumbh which serve as a vibrant platform for stakeholders to network
and collaborate. Initiatives to improve market access and enable public
procurement support startups in growing and scaling up their businesses. These
measures are complemented by regulatory reforms and other ecosystem
development events and programs.
8. The Atal Innovation Mission (AIM) of NITI Aayog fosters innovation and
entrepreneurship among India’s youth through flagship programs like Atal
Tinkering Labs (ATLs), Atal Incubation Centres (AICs) incubation facilities and
Atal Community Innovation Centres (ACIC), and the Community Innovator
Fellowship (CIF). Other Program like International Bilateral Program, LanguageInclusive Program of Innovation (LIPI - Vernacular Innovation Centres), Deeptech
Reactor, AIM-WIPO Joint Program, and Human Capital Development under AIM
2.0 mandate are being piloted involving all relevant stakeholders.
9. Under the Ministry of Defence the Scheme for Innovations for Defence Excellence
(iDEX) and Acing Development of Innovative Technologies with iDEX (ADITI) are
fostering innovation and technology development in defence and aerospace by
engaging startups.
10. Under the Department of Science & Technology, the Research, Development,
and Innovation (RDI) Scheme has been approved to incentivize private sector
participation in research and development (R&D). Further, DST is implementing
the National Initiative for Developing and Harnessing Innovations (NIDHI) to
promote innovation and entrepreneurship among the youth. The initiative
comprises NIDHI-PRAYAS (prototype grant support), NIDHI-EIR (Entrepreneur-
in-Residence fellowships), NIDHI-iTBI (Inclusive TBIs in Tier-II and Tier-III
regions).
11. The Anusandhan National Research Foundation (ANRF) has initiated the
program, Mission for Advancement in High-impact Areas (MAHA) to address
priority-driven, solution-focused research in mission-mode.
12. The Department of Biotechnology (DBT) has established biotechnology
incubation and pre-incubation centres across States & Union Territories (UTs)
under the BioNEST (Bioincubators Nurturing Entrepreneurship for Scaling
Technologies) and E-YUVA (Encouraging Youth for Undertaking Innovative
Research Activities) schemes amongst other programmes under Biotechnology
Industry Research Assistance Council (BIRAC).
13. Ministry of Electronics and Information Technology (MeitY) is undertaking
initiatives such as GENESIS (Gen-Next Support for Innovative Startups) Scheme,
TIDE 2.0 (Technology Incubation and Development of Entrepreneurs) Scheme,
and IndiaAI Mission to promote the startup ecosystem.
14. The Ministry of Skill Development and Entrepreneurship (MSDE) through its
autonomous organizations, namely National Institute for Entrepreneurship and
Small Business Development (NIESBUD) and Indian Institute of Entrepreneurship
(IIE) has taken various initiatives to promote entrepreneurship development
amongst all sections of the society. These initiatives include, Swavalambini
programme, Entrepreneurship Awareness Programmes (EAP), Entrepreneurship
Development Programmes (EDP), Pradhan Mantri Janjati Adivasi Nyaya Maha
Abhiyaan (PMJANMAN), Entrepreneurship Development Centres (EDC) in North
East Region’s Educational Institutions, Dharti Aaba Janjatiya Gram Utkarshh
Abhiyan (DAJGUA), Pradhan Mantri Surya Ghar Muft Bijli Yojana Scheme (PM
SGMBY Scheme), and Capacity Building Programme for Fair Price Shop Owners.
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