Following India’s budget speech at the start of 2025, the government approved a state venture capital program worth USD 1.1 billion, aimed at financing startups through private investors. This is a move that doubles the effort to support high-risk projects, with a focus on artificial intelligence, advanced manufacturing, and other areas of deep tech.
The initial version of the program was presented in the Finance Minister’s budget statement in January 2025; the ₹100 billion fund received Cabinet approval this week after a long wait. The previous version of the program, launched in 2016, envisaged ₹100 billion for 145 private funds that invested over ₹255 billion (about $2.8 billion) in over 1,370 startups, according to official data.
The mechanism is structured as a fund of funds – a well-known venture capital model in which the government supports startups indirectly by investing capital in private investment companies. The new initiative is more targeted: an emphasis on deep-tech and manufacturing startups that require a long horizon and substantial investments, while also supporting early stages, expanding investments beyond large cities, and strengthening the domestic venture capital sector with a special emphasis on smaller funds.
At the Saturday announcement, IT Minister Ashwini Vaishnaw underscored the scale of growth of Indian startups, citing data from the slide: the number of startups has grown from less than 500 in 2016 to over 200,000 today. The slide also noted that more than 49,000 startups were registered in 2025 alone, a record for a year.
Cabinet approval came amid recent changes to the rules for deep-tech startups aimed at easing regulatory pressure. New Delhi extended the eligibility period for such companies as startups to 20 years and raised the income threshold for tax, grant, and regulatory benefits to ₹3 billion (about $33 million), compared with the previous ₹1 billion.
Expectations for the new mechanism and the state of private capital
The approval comes as the AI summit supported by the Indian government is expected to include global AI companies alongside Indian giants. OpenAI, Anthropic, Google, Meta, Microsoft, and Nvidia are expected to participate, along with companies such as Reliance Industries and the Tata Group. India, which has over a billion online users, is becoming an increasingly attractive hub for global technology giants seeking to expand their presence in the region.
At the same time, private capital is facing new challenges: in 2025, India’s startup ecosystem attracted $10.5 billion, down more than 17% compared with the previous year, as investors became more selective and cut deal counts. According to Tracxn, the number of rounds fell by almost 39% to 1,518 transactions.
Broad consultations have been held with all stakeholders.
