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New mutual fund rules to make investments unattractive for foreign investors: Former NASSCOM chief

By Surabhi Upadhyay | Mar 27, 2023 3:00 PM IST (Published)

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Speaking to CNBC-TV18, Saurabh Srivastava, the former chairman of NASSCOM, stated that new mutual fund rules will make it difficult for foreign investors to invest in India. According to Srivastava, foreign firms and venture capitalists (VCs) do not create entities in every country they operate in, making it difficult for foreign investors to invest in India.

personal finance | Mar 27, 2023 3:00 PM IST

Startups haven't seen much relief from the proposed change to the angel tax regime, which was revealed in the Union Budget 2023. According to the proposal, foreign investors will be brought under the ambit of angel tax. This move is expected to restrict foreign funding to startups. Speaking to CNBC-TV18, Saurabh Srivastava, the former chairman of NASSCOM, stated that new mutual fund rules will make it difficult for foreign investors to invest in India.

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This is particularly concerning as 85 percent of risk capital that goes into the Indian startup ecosystem is foreign capital. Srivastava believes that it is in India's best interest to make foreign capital investment in the country more friendly.

“85 percent of the risk capital, venture capital, private equity and angel investments actually is foreign capital. If it wasn't a foreign capital, we wouldn't have had a single one out of the 100 plus unicorns that we have. So, we are very dependent on foreign capital. I think it's in our interest to make sure that they find it friendly to invest here,” Srivastava told CNBC-TV18.

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Srivastava points out that no other country has imposed an angel tax, which is a tax on investments made by external investors in startups. This tax has been a major concern for foreign investors and has resulted in a decrease in investments in Indian startups.

“All countries have the same concerns about money laundering but none of them have actually imposed Angel tax. Quite honestly, if you look at it, we have enough rules and regulations that would take care of this,” Srivastava said.

The environment is challenging for startups, and many of them struggle to survive. Srivastava emphasizes the need for a supportive ecosystem to help startups thrive.

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(Edited by : Anshul)

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