India Invests Heavily in Deep Tech with New $1.1B Venture Capital Fund
India has given the green light to a significant $1.1 billion state-backed venture capital program. This initiative aims to channel government funding into startups, particularly in high-risk sectors like artificial intelligence, advanced manufacturing, and other areas broadly categorized as deep tech. The move signifies a strong commitment from the Indian government to foster innovation and growth in critical technological fields.
Initially proposed in the January 2025 budget speech by India's finance minister, the ₹100 billion fund received cabinet approval this week, over a year after its initial announcement. This paves the way for the government to begin deploying capital. A preceding program, launched in 2016 with a similar ₹100 billion allocation, supported 145 private funds. These funds, in turn, invested over ₹255 billion (approximately $2.8 billion) into more than 1,370 startups, according to official data released recently.
A Strategic Fund of Funds Approach
The newly approved program operates as a fund of funds, a recognized venture capital model where governments indirectly support startups by investing in private investment firms. This structure allows for a more focused strategy compared to its 2016 predecessor. The current program is specifically designed to target deep-tech and manufacturing startups, which often require substantial capital and longer investment horizons. Furthermore, it aims to support early-stage founders, broaden investment beyond major metropolitan areas, and strengthen India's domestic venture capital ecosystem, with a particular emphasis on supporting smaller funds, as stated by the Indian government.
Record Startup Growth in India
During the announcement, IT minister Ashwini Vaishnaw highlighted the dramatic expansion of India's startup landscape. Presentation slides indicated a surge from fewer than 500 startups in 2016 to over 200,000 today. The figures also revealed that more than 49,000 startups were registered in 2025 alone, marking the highest annual total on record.
Supportive Regulatory Changes for Deep Tech
This cabinet approval follows recent adjustments to India's startup regulations, intended to alleviate pressure on deep-tech companies. The government has doubled the period for which such firms can be classified as startups to 20 years. Additionally, the revenue threshold for qualifying for startup-specific tax, grant, and regulatory benefits has been raised to ₹3 billion (approximately $33 million), up from the previous ₹1 billion.
Global Tech Interest Amidst Funding Challenges
The timing of this announcement is particularly noteworthy, preceding the government-backed India AI Impact Summit. This event is expected to draw participation from global AI leaders, including OpenAI, Anthropic, Google, Meta, Microsoft, and Nvidia, alongside prominent Indian corporations like Reliance Industries and Tata Group. As the world's most populous nation and a major internet market with over a billion online users, India presents an increasingly attractive environment for global tech companies seeking to expand their user base.
However, the broader startup ecosystem is facing challenges in securing private capital. In 2025, India's startups raised $10.5 billion, a decrease of just over 17% compared to the previous year. Investors have become more discerning, leading to a significant reduction in the number of deals. Data from Tracxn indicates that the number of funding rounds fell by nearly 39%, totaling 1,518 transactions.
Minister Vaishnaw emphasized the flexibility of the new venture capital program, noting that "extensive consultations have taken place with all stakeholders."
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