- The proposal is expected to assist Indian SME sector in need of funding to the tune of Rs 26 lakh crore
Mumbai, September 11, 2017: The Indo-American Chamber of Commerce (IACC) has suggested setting up of a “Guarantee Fund” for promoting Indo-US ventures in each others’ country, particularly for funding enterprises in small and mid-sized space.
The suggestion has come in the wake of slow progress in the handholding of Small and Medium Enterprises (SMEs) in both countries. “Shyness on the part of this segment of industry to come together and invest in each other’s country is mostly driven by lack of adequate sources for funding such enterprises. Our experience is that many initiatives had fallen through after making considerable progress initially on account of the financial constraints. Indian banks and multilateral organizations are often back track lending to such enterprises on account of high risk factors. A dedicated guarantee fund, where banks and financial institutions from both countries participate, sharing their resources, will be an ideal platform for ensuring sufficient funds for all segments of industry including SMEs,” says Mr. NV Srinivasan, National President, IACC.
IACC is likely to impress upon the government the need for setting up such funds at its forthcoming meeting with the Union Finance Secretary Mr. Ashok Lavasa in Mumbai at the IACC’s flagship event – Annual Convention- to be held on 18-19 September. Importantly, the meeting to be attended by over 300 delegates from India and the US is devoting a full session on Funding Growth of India-US enterprises. Delegates to this session include chief executives and private and public banks, industry representatives and academia.
IACC has catalogued a few areas that need immediate attention to channelize the investment of US corporations into India. These include investments in the renewable energy, medical technology, electronics, tourism and hospitality and education. These are segments mostly SME sector has a major stake. Yet, the enterprises operating in these domains are severely hit by lack of funding channels.
IACC’s pitch is that the proposed Guarantee Fund should be similar to that being set up by the Department of Industrial Policy and Promotion (DIPP) for startups. Accessing finance is one of the primary challenges of the startups. The Fund allocated by DIPP for startups are in the vicinity of Rs 2000 crore, which is likely to be revised upwards depending on the genuine demand. The foreign direct policy of the circular 2017 of the Government of India has clearly spelt out provisions for the startups to allow them to tap money from overseas channels. “We need special arrangements for SMEs of India and US to have access to additional sources of funding since the existing banks and institutions do not have the risk appetite to give sufficient exposure to SMEs,” says Mr. Srinivasan.
IACC has said that organizations like SIDBI and OPIC (Overseas Private Investment Corporation), a self-sustaining U.S. Government agency, can come together in setting up the fund to be availed by enterprises from both countries. Importantly, the “Fund of Funds” of Rs 10,000 crore managed by SIDBI has committed a substantial quantum of funds to startups. The same principle can be followed in the case of Indo-US SMEs by allocating a sizeable fund, which can really trigger a faster pace of handholding and technology transfer, says IACC.
About Indo American Chamber of Commerce:
The Indo-American Chamber of Commerce (IACC), established in 1968, is the apex bi-lateral Chamber synergizing India-US Economic Engagement. It was started by Ambassador Chester Bowles along with the then Industry leaders and visionaries like Mr. S L Kirloskar, Mr. Harish Mahindra, Mr. H. P. Nanda, Mr. Ambalal Kilachand, Mr. A. M. M. Arunachalam, Mr. Frederick Fales and Mr. John Oris Sims for enhancing US India Economic Engagement. Today IACC has pan India presence with 2400 members at 12 locations, representing cross section of US and Indian Industry. The major objective of IACC is to promote Indo-American business, trade and economic relations. IACC promotes bilateral trade, investment and technology transfer, facilitates business collaborations, joint ventures, marketing tie-ups and strategic alliances through a set of proactive business-oriented initiatives.
IACC acts as a catalyst for sustainable growth of business between India and the US. In its four decades of existence, IACC has established operational connectivity with a host of business, research and developmental institutions in India and US in order to leverage each other’s capabilities for enhancing Indo-US business relations. The Chamber continuously interacts with the Indian and US Governments, and provides them feedback on bilateral issues relating to trade and investment. In essence, IACC also acts as a forum for its member companies to interact with senior functionaries of both the Governments. IACC member companies are involved in a cross-section of business domains such as manufacturing, engineering, construction, consumer goods, electronics, IT, pharmaceuticals, consulting, travel and tourism, etc.
The geographical spread of IACC is unique as it operates through 12 offices located throughout the country. These are in Ahmedabad, Bangalore, Bhubaneswar, Chennai, Cochin, Delhi, Hyderabad, Kolkata, Mumbai, Pune, Varanasi & Patna.