India Approves $1.1bn State-Backed Venture Capital Program to Boost AI and Deep Tech Startups
The government of India has approved the creation of a new state-backed venture capital program worth $1.1 billion, aimed at channeling funding to startups through private-sector fund managers. The move reflects the country’s accelerating push to support high-risk, high-impact sectors such as artificial intelligence, advanced manufacturing, and deep technologies.
Initially announced as part of the 2025 budget, the program has now received cabinet approval, paving the way for capital deployment under a “fund-of-funds” model. Under this structure, the state invests in privately managed venture funds, which in turn finance startups—rather than providing direct government funding—enhancing capital allocation efficiency while leveraging market expertise.
The new fund builds on a similar initiative launched in 2016 with comparable funding in Indian rupees. According to official data, that earlier program committed capital to 145 private funds, which subsequently invested more than $2.8 billion in over 1,370 startups. This time, however, the government aims to channel funding more selectively toward deep tech and manufacturing ventures, which typically require larger investments and longer time horizons to generate returns.
The program also targets early-stage companies, seeks to expand venture investment beyond major urban hubs, and aims to strengthen India’s domestic venture capital ecosystem—particularly small and mid-sized funds.
Announcing the approval, Information Technology Minister Ashwini Vaishnaw highlighted the rapid expansion of India’s startup ecosystem. He noted that the number of registered startups has surged from fewer than 500 in 2016 to more than 200,000 today, with over 49,000 new startups registered in 2025 alone, marking a record annual increase.
Regulatory Reforms Package
The approval coincided with a package of regulatory reforms designed to ease pressures on deep tech companies. Measures include extending the official startup classification period to 20 years and raising the revenue threshold for eligibility for tax and regulatory incentives to around $33 million, up from roughly $11 million previously.
The announcement comes ahead of the upcoming India AI Impact Summit, expected to feature participation from global technology players such as OpenAI, Google, Meta, Microsoft, and Nvidia, alongside major Indian conglomerates.
Despite India’s scale—home to over one billion internet users and the world’s largest population—the startup sector has faced funding headwinds. Total capital raised by Indian startups in 2025 fell to $10.5 billion, down more than 17% year-on-year, while the number of funding rounds declined by nearly 39% to 1,518 deals, reflecting tighter investor scrutiny and higher selection standards.
The launch of the new fund underscores the government’s effort to bridge early- and mid-stage funding gaps, stimulate innovation in strategic sectors, and reinforce India’s position as an emerging global hub for artificial intelligence and advanced industrial technologies.