India has officially approved a substantial $1.1 billion venture capital initiative, aimed at directing government funding into startups via private investors. This move signifies a robust commitment to finance high-risk sectors, notably in artificial intelligence, advanced manufacturing, and other innovative fields collectively termed as deep tech.
The fund, outlined in the January 2025 budget speech by the finance minister, received cabinet approval this week, allowing the government to initiate deployment. A previous version of this program, initiated in 2016, allocated ₹100 billion to 145 private funds, which have collectively invested over ₹255 billion (approximately $2.8 billion) in more than 1,370 startups, as per official statistics.
This program operates as a fund of funds, a prevalent model in venture capital where government support is channeled indirectly through private investment firms. It aims to adopt a more focused strategy than its predecessor, emphasizing deep-tech and manufacturing startups that typically demand longer timelines and substantial capital. Furthermore, it seeks to support early-stage entrepreneurs, broaden investment beyond major urban centers, and enhance India's domestic venture capital landscape, particularly for smaller funds.
During the announcement, IT Minister Ashwini Vaishnaw underscored the remarkable growth of India's startup ecosystem, noting that the number of startups has surged from under 500 in 2016 to over 200,000 today. The presentation revealed that more than 49,000 startups were registered in 2025 alone, marking the highest annual total to date.
This cabinet approval follows recent adjustments to India's startup regulations, aimed at alleviating challenges for deep-tech companies. The government has extended the duration for which firms are classified as startups to 20 years and raised the revenue threshold for receiving startup-specific tax, grant, and regulatory benefits to ₹3 billion (around $33 million), up from ₹1 billion.
The timing of this approval coincides with the upcoming India AI Impact Summit, where leading global AI firms, including OpenAI, Google, and Microsoft, will engage with Indian corporations like Reliance Industries and Tata Group. As the world's most populous nation and a significant internet market with over a billion online users, India presents a compelling opportunity for global tech companies seeking to expand their reach.
At the same time, securing private investment has become increasingly challenging. In 2025, India's startup ecosystem raised $10.5 billion, reflecting a decline of over 17% from the previous year, as investors have become more selective, resulting in a nearly 39% drop in the number of funding rounds.
Vaishnaw emphasized that the new venture capital initiative will maintain flexibility, noting that "extensive consultations have taken place with all stakeholders."
