India doubles state-backed venture capital, approves $1.1 billion fund

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

First outlined in India’s finance minister’s budget speech in January 2025, the Rs 100 billion fund received Cabinet approval this week (more than a year after the speech), allowing the government to go ahead with rollout. The previous version of the programme, launched in 2016, allocated INR 100 billion to 145 private funds that invested more than INR 255 billion (about $2.8 billion) in more than 1,370 startups, according to official data released on Saturday.

The program is designed as a fund of funds, a corporate venture capital model in which governments indirectly support startups by allocating capital to private investment firms. 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 supporting early-stage founders, expanding investment beyond major cities and boosting India’s domestic venture capital industry, especially small funds, according to the Indian government.

In the announcement on Saturday, IT Minister Ashwini Vaishnaw highlighted the scale of startup expansion in India, pointing to figures shown in his presentation slide that the number of startups has risen from less than 500 in 2016 to more than 200,000 today. The slide said that more than 49,000 startups were registered in 2025 alone, the highest annual total on record.

The Cabinet approval comes in the wake of 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 taxes, grants and regulatory benefits for startups to 3 billion Indian rupees, or about 33 million US dollars, up from 1 billion Indian rupees previously.

The approval comes ahead of the government-backed India AI Impact Summit, where global AI companies including OpenAI, Anthropic, Google, Meta, Microsoft and Nvidia are set to participate along with 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, has become an increasingly attractive arena for global technology companies looking to expand their user base.

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

The new venture capital program will remain flexible, Vaishnau said, adding that “extensive consultations have been undertaken with all stakeholders.”