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

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

The Rs 1,000 billion fund, first outlined in India’s finance minister’s January 2025 budget speech, received cabinet approval this week (more than a year after the speech), allowing the government to proceed with deployment. The previous program, launched in 2016, committed 100 billion rupees to 145 private funds and invested more than 255 billion rupees (about $2.8 billion) in more than 1,370 startups, according to official data released on Saturday.

The program is structured as a fund of funds, a common venture capital model in which the government indirectly supports startups by injecting capital into private investment companies. The Indian government says it is designed to take a more targeted approach than its 2016 counterpart, focusing on deep tech and manufacturing startups that typically require long-term horizons and large amounts of capital, while supporting early-stage founders, expanding investments beyond major cities, and strengthening India’s domestic venture capital industry, particularly small funds.

In her announcement on Saturday, IT Minister Ashwini Vaishnau highlighted the scale of India’s startup expansion, citing figures shown in a presentation slide showing that the number of startups has increased from less than 500 in 2016 to more than 200,000 today. The slide said more than 49,000 startups will be registered in 2025 alone, which is the highest annual total ever.

The cabinet approval follows recent changes to India’s startup rules aimed at easing pressure on deep tech companies. New Delhi has doubled the period for which such companies are classified as startups to 20 years and raised the income threshold for startup-specific taxes, subsidies and regulatory incentives to 3 billion rupees (approximately $33 million) from the previous 1 billion rupees.

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 are expected to participate, along with Indian companies such as Reliance Industries and Tata Group. As the world’s most populous country and one of the country’s largest internet markets with more than 1 billion online users, India is an increasingly attractive arena for global technology companies looking to expand their user base.

At the same time, securing private capital is becoming increasingly difficult. India’s startup ecosystem raised $10.5 billion in 2025, down just over 17% year-on-year, despite investors becoming more selective and significantly reducing the number of deals. The number of funding rounds fell by nearly 39% to 1,518 deals, according to Tracxn data.

Vaishnau said the new venture capital program remains flexible, adding that “extensive consultations have been held with all stakeholders.”