India doubles down on state-backed venture capital, approving $1.1B fund

India has approved a $1.1 billion state-backed venture capital program that will channel government money through private investors to startups, redoubling its efforts to fund high-risk areas such as artificial intelligence, advanced manufacturing and other sectors widely referred to by the industry as deep tech.

The ₹100 billion fund, which was first outlined in the January 2025 budget speech by India’s finance minister, received Cabinet approval this week (more than a year after the speech), allowing the government to move forward with the deployment. An earlier version of the program, launched in 2016, allocated ₹100 billion to 145 private funds that invested more than ₹255 billion (about $2.8 billion) in over 1,370 startups, according to official data. issued on Saturday.

The program is structured as a fund of funds, a common venture capital model in which governments indirectly support startups by providing capital to private investment companies. It is designed to take a more targeted approach than its 2016 counterpart, focusing on deep-tech and manufacturing startups that typically require longer time horizons and larger amounts of capital, while also backing early-stage founders, expanding investments beyond major cities and strengthening India’s domestic venture capital industry, especially smaller funds, the Indian government said.

Making the announcement on Saturday, IT Minister Ashwini Vaishnaw highlighted the scale of India’s startup expansion, pointing to figures on a presentation slide indicating that the number of startups has grown from less than 500 in 2016 to more than 200,000 today. The graph shows that more than 49,000 startups were registered in 2025 alone, the highest annual total ever recorded.

The Cabinet approval follows recent changes to India’s startup rules aimed at easing pressure on deep-tech companies. New Delhi doubled the period for which such companies are classified as startups to 20 years and raised the revenue threshold for startup-specific tax, subsidy and regulatory benefits to ₹3 billion, or about $33 million, from ₹1 billion previously.

The approval comes just ahead of the government-backed India AI Impact Summit, where global AI companies including OpenAI, Anthropic, Google, Meta, Microsoft and Nvidia will participate alongside Indian companies such as Reliance Industries and Tata Group. India, the world’s most populous country and one of the largest internet markets with more than a billion online users, has become an increasingly attractive arena for global technology companies looking to expand their user base.

At the same time, it has become more difficult to secure private capital. India’s startup ecosystem raised $10.5 billion in 2025, down just over 17% from a year earlier, even as investors became more selective and sharply reduced the number of deals. The number of financing rounds fell by almost 39% to 1,518 transactions, according to data from Tracxn.

Vaishnaw said the new venture capital program would remain flexible, adding that “extensive consultations have taken place with all stakeholders.”