India has approved a $1.1 billion government-backed venture capital program aimed at injecting state funds into startups through private investors. This initiative underscores the country’s commitment to financing high-risk sectors, including artificial intelligence, advanced manufacturing, and other areas often categorized under deep tech.
Originally proposed in the January 2025 budget speech by India’s finance minister, the ₹100 billion fund received cabinet approval this week, more than a year after the initial announcement. The previous version of the program, which launched in 2016, allocated ₹100 billion to 145 private funds that have since invested over ₹255 billion (about $2.8 billion) in more than 1,370 startups, according to official reports released on Saturday.
The program operates as a fund of funds—a model where the government supports startups indirectly by investing in private firms. This new initiative aims to be more focused than its 2016 predecessor, specifically targeting deep-tech and manufacturing startups that often require longer timelines and larger investments. It also aims to support early-stage founders, extend investments beyond major urban centers, and bolster India’s domestic venture capital scene, particularly for smaller funds, as highlighted by the Indian government.
During the announcement on Saturday, IT Minister Ashwini Vaishnaw noted the rapid growth of India’s startup ecosystem, displaying data that shows the number of startups has surged from under 500 in 2016 to over 200,000 today. The presentation mentioned that more than 49,000 startups were registered in 2025, marking the highest annual total on record.
This cabinet approval follows recent amendments to India’s startup regulations intended to alleviate pressure on deep-tech companies. The Indian government has extended the classification period for these firms to 20 years and increased the revenue threshold for startup-specific tax, grant, and regulatory benefits to ₹3 billion (around $33 million), up from the previous ₹1 billion.
The timing of this approval coincides with the upcoming India AI Impact Summit, where global AI firms like OpenAI, Anthropic, Google, Meta, Microsoft, and Nvidia will join Indian giants such as Reliance Industries and Tata Group. With over a billion online users, India has emerged as a highly appealing market for global tech companies seeking to grow their user base.
However, securing private investment has become more challenging. India’s startup ecosystem raised $10.5 billion in 2025, a dip of over 17% from the previous year, as investors have become more selective and the number of deals has sharply declined. The number of funding rounds dropped nearly 39%, totaling 1,518 transactions, based on data from Tracxn.
Vaishnaw stated that the new venture capital program would be adaptable and emphasized that extensive consultations had occurred with all relevant stakeholders.
