India has approved a $1.1 billion state-backed venture capital program that will channel government money to startups through private investors, doubling its efforts to fund high-risk areas such as artificial intelligence, advanced manufacturing and other sectors the industry generally refers to as deep technology.
The ₹100 billion fund, first outlined in India’s finance minister’s January 2025 budget speech, won Cabinet approval this week (more than a year after the speech), allowing the government to move forward with the deployment. The previous iteration of the program, launched in 2016, provided ₹100 billion to 145 private funds that invested more than ₹255 billion (about US$2.8 billion) in more than 1,370 startups, according to official data released on Saturday.
The program is structured as a fund of funds, a common venture capital model in which governments indirectly support startups by investing capital in private equity firms. It is designed to take a more targeted approach than its 2016 counterpart, targeting deep-tech and manufacturing startups that typically require longer time horizons and larger amounts of capital, while supporting early-stage founders, expanding investment beyond major cities and strengthening India’s domestic venture capital industry, especially smaller funds, according to the Indian government.
In Saturday’s announcement, IT Minister Ashwini Vaishnaw highlighted the scale of India’s startup expansion, pointing to figures shown in a slide show that the number of startups has grown from less than 500 in 2016 to more than 200,000 today. The slide says that more than 49,000 startups were registered in 2025 alone, the highest annual total on record.
The cabinet’s approval follows recent changes to India’s incorporation rules aimed at easing pressure on deep-tech companies. New Delhi doubled the time for which such firms are classified as start-ups to 20 years and raised the income threshold for startup-specific tax, grant and regulatory benefits to ₹3 billion, or about $33 million, from ₹1 billion earlier.
The approval comes just ahead of the government-sponsored India AI Impact Summit, where global AI companies including OpenAI, Anthropic, Google, Meta, Microsoft and Nvidia are expected to participate alongside Indian companies such as Reliance Industries and Tata Group. India, the world’s most populous country and one of its largest internet markets with more than a billion online users, is becoming an increasingly attractive arena for global technology companies looking to expand their user base.
At the same time, it is increasingly difficult to secure private capital. India’s startup ecosystem raised $10.5 billion in 2025, down a little more than 17% from a year earlier, even as investors became more selective and sharply reduced the number of deals. Funding rounds fell nearly 39% to 1,518 transactions, according to Tracxn data.
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Vaishnaw said the new venture capital program would remain flexible, adding that “extensive consultation has taken place with all stakeholders”.