(With inputs from PTI)

On Monday, the Commerce Ministry released its consolidated FDI Foreign Direct Investment ) policy which for the first time included startups. They will now be allowed to raise up to 100 per cent funding from Foreign Venture Capital Investor (FVCI).An official document was released by the Department of Industrial Policy and Promotion (DIPP) which employed the rules with immediate effect.The government's latest tweak in the FDI policy may well prove to be the much needed shot in the arm for India's startup industry which seems to be past the boom it saw in the last few years.“It's come at a time when fund raising and capital invested by VC’s decreased over the previous years, this framework will help boost investments the startup ecosystem," said Indian Private Equity & Venture Capital Association(IVCA) president Rajat Tandon.According to data from startup intelligence firm Tracxn, the deal count for the first half (H1) of 2017 was down by 27 per cent on a year-on-year (YoY) basis as only 396 tech startups got funded during the period, as compared to 547 in H1 of 2016."The decision has come at a crucial time as except for some big investors like Sequoia, the Indian venture capital funds have not grown which has led the funds to dry up. This decision will definitely encourage the inflow of funds in India as foreign investors are likely to get better returns from Indian startups than European ones," said Mahendra Swarup, Founder of Venture Gurukool and President, Startup India Association.The 2017 FDI policy circular lists startups as a separate section and spells out provisions that allow them to raise foreign money from venture capital funds and other investors through instruments such as convertible notes, as per the document released by the DIPP.A person residing outside India (other than citizens/ entities of Pakistan and Bangladesh) will be permitted to purchase convertible notes issued by an Indian startup company for an amount of Rs 25 lakh or more in a single tranche, the official DIPP document added.A convertible note is an investment vehicle often used by seed investors investing in startups who wish to delay establishing a valuation for that startup until a later round of funding or milestone."Inclusion of Startups in FDI policy allowing 100 FVCI is a great initiative by the government. This initiative will help lot many start-ups to get access to much-needed capital which sometimes becomes cumbersome due to procedural issues. The government has taken proactive measures in supporting startups and allowing 100% FVCI is clear indication of importance what start-ups have in government’s scheme of thing," Anil Joshi - member of Indian Private Equity and Venture Capital Association (IVCA) and partner, Unicorn India Ventures saidEarlier this month, Prime Minister Narendra Modi , had called upon startups to play a more active role in governance.“Our current team in the Central government is keen to learn new things, which is the reason why I am asking you all to join permanently with the government,” Modi told more than 200 start-up founders in a Niti Aayog programme called 'Champions of Change' on August 17.The Modi government, on its part, has been trying to nurture startups, since its early days of assuming office. Apart from its 'Startup India' and 'Standup India' initiatives, its push towards digital and 'less cash' economy has also given a boost to FinTech companies. However, the Tracxn study paints a skewed picture in the startup ecosystem.The data shows that over $5.19 billion was raised by India’s tech startups ecosystem during the first half of 2017 but over 53 per cent of the total capital raised went to just two companies — Flipkart and Paytm , which went on to bag $1.4 billion each in April and May respectively this year.With PM Modi rooting for a 'New India' by 2022, this change in FDI policy may well be instrumental in ushering what he envisages.