India has announced a plan of $1.1 billion for state-backed venture capital to stimulate the country’s fledgling startup ecosystem. This program will route public money into early stage companies by way of private investors. It will especially focus on high-risk sectors such as artificial intelligence and advanced manufacturing, which we refer to as deep tech. The program is a big departure from its 2016 predecessor, taking a much more focused approach.
The new venture capital program will target deep-tech and advanced manufacturing startups. These startups frequently require longer development and market time horizons, and deeper capital investments to become self-sustaining. It takes a unique approach by focusing on empowering early-stage founders. Simultaneously, it expands the pool of investment capital available to help high-growth, innovative startups located in second- and third-tier cities that require early-stage funding.
This new initiative is designed to help build India’s domestic venture capital ecosystem. It especially shines a light on the smaller funds that have a hard time getting funded. The cabinet only recently approved the decision, just ahead of the highly-anticipated India AI Impact Summit. Global AI leaders such as OpenAI, Anthropic, Google, Meta, Microsoft and Nvidia are getting ready to take part. Indian corporate behemoths like Reliance Industries and Tata Group will figure prominently in the policy shaping agenda at the summit, too.
This program couldn’t have come at a better time. It comes together with the backdrop of recent regulatory shifts from the Indian government to relieve pressures on deep-tech companies. These changes are a direct answer to the rapid growth of India’s startup ecosystem. From just a handful of startups in 2016, the record now stands at more than 200,000! Fifth and finally, 2025 was the year of the startup, registering over 49,000 startups, the most in a year ever recorded.
Nevertheless, this bright news has been juxtaposed with a difficult startup funding environment. By 2025, India’s startups had raised only $10.5 billion, a drop of 17% year-on-year from the previous year’s total. Further, the total number of funding rounds dropped by almost 39%, with just 1,518 transactions, according to data analytics firm Tracxn.
The government’s proactive approach through this new venture capital program seeks to address these challenges by encouraging investment in high-potential startups and fostering innovation across the country. India’s new approach is to give targeted support to entrepreneurs. It is increasing access to investment to remain the leading combatant in the worldwide technological startups battleground.