But perhaps the lack of awareness of the impediment which this piece of legislation poses to the development of venture capital shows the general lack of awareness of the importance of venture capital itself. There can be no other explanation for the government's reluctance to treat venture-capital funds at par with mutual funds, and remove the restrictive income-tax norms for them. Sebi has, from time to time, reminded government officials about the importance of removing these impediments to the growth of the venture-capital industry, but there seems to have been precious little response.

Foreign private funds have been of late taking an active interest in many small Indian companies.But it is not just a matter of supporting small ventures--the crux of the matter is supporting innovation. There is no dearth of technical expertise in India, and all a breakthrough often needs is a financial backer. This is where venture capital comes in, not merely through venture-capital funds, but often as investment by firms themselves, anxious to benefit from a possible innovation in their field.

In the US, financing venture capitalists is a well-established tradition, and success stories like the biotech firm Genentech need no introduction. Smaller firms are usually far more nimble and flexible than well-established ones, and it may be argued that they represent India's future. Investment by corporates and funds to support new ventures is an investment in this country's future, and they need all the help the government can give.