India has officially approved a substantial $1.1 billion state-backed venture capital initiative aimed at directing government funds into startups via private investors. This strategic move is designed to bolster high-risk sectors, including artificial intelligence and advanced manufacturing, collectively referred to as deep tech.
Originally announced in the January 2025 budget speech by the finance minister, this ₹100 billion program gained cabinet approval recently, marking a pivotal step in its implementation over a year after its introduction. A prior version of this initiative, launched in 2016, pledged ₹100 billion to 145 private funds, which subsequently invested more than ₹255 billion (approximately $2.8 billion) in over 1,370 startups, as per official reports released last Saturday.
The newly sanctioned program operates as a fund of funds, a prevalent model wherein the government indirectly supports startups by investing in private investment firms. This approach intends to target deep-tech and manufacturing startups that typically require longer investment horizons and larger capital infusions. Additionally, it aims to support early-stage entrepreneurs and promote investment beyond just major metropolitan areas, thereby strengthening India’s domestic venture capital landscape, particularly for smaller funds.
During the announcement, IT Minister Ashwini Vaishnaw emphasized the remarkable growth of India’s startup ecosystem, citing statistics that indicate the number of startups has surged from fewer than 500 in 2016 to over 200,000 today. The presentation revealed that more than 49,000 startups were registered in 2025 alone, setting a record for the highest annual total.
This cabinet approval coincides with recent regulatory adjustments designed to relieve pressure on deep-tech companies. Changes include extending the classification period for startups to 20 years and raising the revenue cap for accessing startup-specific tax, grant, and regulatory benefits from ₹1 billion to ₹3 billion (approximately $33 million).
The timing of this approval aligns with the upcoming India AI Impact Summit, which will feature participation from leading global AI entities such as OpenAI, Anthropic, Google, Meta, Microsoft, and Nvidia, alongside major Indian corporations like Reliance Industries and Tata Group. With over a billion online users, India stands as a growing hub for global tech companies seeking to broaden their reach.
However, securing private capital has become increasingly challenging, with India’s startup ecosystem attracting $10.5 billion in 2025—down by over 17% from the previous year. Investors have grown more selective, resulting in a nearly 39% drop in funding rounds, with only 1,518 transactions reported, according to data from Tracxn.
Vaishnaw asserted that the new venture capital program would maintain adaptability, stating that “extensive consultations have taken place with all stakeholders.”
