Damodaran Committee to boost PE/VC investments

The Union Finance Ministry recently set up an expert committee headed by former SEBI chief M. Damodaran to assess and recommend ways to solve regulatory issues to boost investments by private equity (PE) and venture capital (VC) in Indian startups.

Key facts

  • Other members of the Damodaran Committee are former member of SEBI and executive director of RBI G. Mahalingam, former member of CBIC D.P. Nagesh Kumar, former principal chief commissioner of IT Ashish Verma, Director General of NCAER Poonam Gupta, and the director of Arun Jaitley National Institute of Financial Management Prabhat Ranjan Acharya.
  • Setting up of this committee was announced by Finance Minister Nirmala Sitharaman in her FY23 budget speech.
  • The expert committee would be involved in assessing regulatory policies and taxation to identify challenges and potential accelerants to facilitate ease of investing in India.
  • It would review issues concerning compliances and suggest ways to accelerate the growth of alternative capital to boost participation in the VC/PE industry.
  • It will also suggest measures to further boost investments into start-ups and sunrise sectors and provide recommendations for future-ready regulatory practices and adoption of international best practices.
  • This will give a major boost to India’s start-up ecosystems, one of the fastest growing in the world.

India’s VC/PE sector

Private equity and venture capital has invested more than Rs.5.5 lakh crore in 2021 to promote the growth of start-ups in India. Private equity and venture capital funds invested 77 billion USD in Indian companies in 2021. This is a 62 per cent increase over the previous year. There was a 37 per cent growth to 1,266 transactions. The total PE/VC investments in start-ups accounted for 37 per cent of the overall funding of 28.8 billion USD. The year 2021 witnessed an addition of 44 unicorns (Start-ups valued above $1 billion).

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