India approves $1.1 billion state-backed venture capital program

The Government of India has approved a ₹100 billion ($1.1 billion) state-backed venture capital program to finance startups in deep tech and manufacturing. First outlined in January 2025, the program is structured as a “fund of funds”—a venture capital model where the government invests in private investment firms rather than directly in startups. This model is designed to channel capital into high-risk sectors, specifically deep tech, which refers to industry sectors requiring long-term capital and advanced technology. The program aims to support these high-risk areas through private investors.

The initiative builds on a previous iteration of the program launched in 2016, which committed ₹100 billion to private funds. According to official data released on Saturday, that earlier program backed 145 private funds, which subsequently invested about $2.8 billion (₹255 billion) into 1,370 startups. At the announcement on Saturday, IT minister Ashwini Vaishnaw highlighted the growth of the country’s startup ecosystem. Vaishnaw stated that the number of startups in India has grown from fewer than 500 in 2016 to more than 200,000 today, with more than 49,000 startups registered in 2025 alone. Vaishnaw noted that the new program would remain flexible, adding that “extensive consultations have taken place with all stakeholders.”

The cabinet’s approval coincides with recent regulatory changes designed to ease pressure on deep tech firms. The government has doubled the period for which these firms are classified as startups to 20 years. It has also raised the revenue threshold for startup-specific tax, grant, and regulatory benefits to ₹3 billion (about $33 million). These regulatory adjustments arrive as private capital becomes harder to secure. According to data from market data provider Tracxn, India’s startup ecosystem raised $10.5 billion in 2025, representing a decline of just over 17% from the previous year. The total number of funding transactions also fell nearly 39% to 1,518 rounds, as private investors grew more selective.

The approval also comes ahead of the India AI Impact Summit. Participants in the summit include OpenAI, Anthropic, Google, Meta, Microsoft, Nvidia, Reliance Industries, and Tata Group.

Why it matters

The $1.1 billion state-backed venture capital program aims to channel government money into high-risk sectors like deep tech and manufacturing, while easing regulatory pressure on startups amid a broader decline in private capital availability.