India Approves $1.1B State-Backed India Venture Capital Fund for Deep Tech

India has approved a new $1.1 billion state-backed India venture capital fund program. This initiative aims to channel government capital into startups through private investors. The fund will primarily focus on high-risk sectors such as deep tech, artificial intelligence (AI), and advanced manufacturing. The program is valued at ₹100 billion.

What Happened

India’s cabinet this week approved the ₹100 billion ($1.1 billion) fund. This approval comes over a year after India’s finance minister first outlined the fund in the January 2025 budget speech. The program is structured as a fund of funds model. Under this model, the government commits capital to private investment firms, which then back emerging startups.

Details From Sources

Fund’s Targeted Approach

The new program is designed for a more targeted approach than its 2016 predecessor. It specifically focuses on deep-tech and manufacturing startups. These ventures typically require longer time horizons and larger capital amounts for development.

Investment Criteria

The program aims to support early-stage founders. It also seeks to expand investment beyond major cities. A key objective is to strengthen India’s domestic venture capital industry, particularly smaller funds. IT minister Ashwini Vaishnaw stated the new program would remain flexible and involved extensive stakeholder consultations.

Previous Program’s Performance

A previous iteration of the program, launched in 2016, committed ₹100 billion to 145 private funds. These funds collectively invested over ₹255 billion (approximately $2.8 billion) in more than 1,370 startups, according to official data released.

Why This Matters

This government investment is significant for high-risk sectors like AI and advanced manufacturing. Private capital might show hesitation in these areas. The broader goal is to strengthen India’s domestic venture capital industry and expand investment geographically. This comes as private capital has become harder to secure in India’s startup ecosystem, with India startup funding down in 2025.

Background Context

The program was initially outlined in the January 2025 budget speech. Recent changes have been implemented to India’s startup rules to ease pressure on deep-tech companies. The period for classifying a firm as a startup was doubled to 20 years. The revenue threshold for startup-specific tax, grant, and regulatory benefits was raised to ₹3 billion (about $33 million) from ₹1 billion, as reported.

Related Data or Statistics

IT minister Ashwini Vaishnaw reported significant startup growth. The number of startups increased from fewer than 500 in 2016 to over 200,000 today. More than 49,000 startups registered in 2025, marking the highest annual total on record.

India’s startup ecosystem raised $10.5 billion in 2025, which represents a decrease of over 17% from the previous year. The number of funding rounds also fell nearly 39% to 1,518 transactions, according to Tracxn data available.

Future Implications (SPECULATIVE)

The cabinet approval precedes the government-backed India AI Impact Summit. This event is set to feature global AI companies like OpenAI, Anthropic, Google, Meta, Microsoft, and Nvidia. Indian corporates such as Reliance Industries and Tata Group are also participating. India stands as the world’s most populous country and a large internet market, positioning it as an attractive arena for global tech companies and potential AI sector investment India.

Conclusion

The government’s approval of the new India venture capital fund underscores its commitment to fostering innovation. This strategic investment supports high-risk, high-reward sectors like deep tech and advanced manufacturing. The fund aims to significantly impact the country’s startup ecosystem, enhancing its global standing in technology.

FAQ

• Q1: What is the primary purpose of India’s new state-backed venture capital fund?

  A1: The fund aims to channel government money into startups, particularly in high-risk areas like artificial intelligence, advanced manufacturing, and deep tech, through private investors.

• Q2: How much capital has the Indian government approved for this venture capital fund?

  A2: India has cleared a $1.1 billion (₹100 billion) state-backed venture capital program.

• Q3: Which sectors will the new India venture capital fund primarily target?

  A3: The fund will primarily focus on deep-tech and manufacturing startups, including areas like artificial intelligence and advanced manufacturing.

• Q4: How does this new fund relate to previous government initiatives for startups?

  A4: It follows a previous program launched in 2016 that also committed ₹100 billion. The new program is designed to be more targeted, focusing on specific high-risk sectors.

• Q5: What changes have recently been made to India’s startup rules to support deep tech?

  A5: The government doubled the period for deep-tech firms to be classified as startups to 20 years and raised the revenue threshold for specific tax and regulatory benefits to ₹3 billion (about $33 million).