India has approved a $1.1 billion state-backed venture capital initiative, marking a significant escalation in its strategy to fuel innovation in high-risk, high-potential sectors like artificial intelligence, advanced manufacturing, and other deep-tech fields. The fund, first announced in the January 2025 budget speech by Finance Minister Nirmala Sitharaman, has now received cabinet approval—over a year after its initial proposal—paving the way for implementation. The ₹100 billion (approximately $1.1 billion) fund operates as a "fund of funds," a common model in public-private venture capital partnerships. Rather than investing directly in startups, the government will commit capital to private investment firms, which will then deploy the money into early- and growth-stage deep-tech ventures. This approach aims to de-risk investments and catalyze broader private sector participation, particularly in areas that require long-term capital and technical expertise. This new program builds on the success of India’s earlier 2016 initiative, which allocated ₹100 billion to 145 private funds. Those funds have since invested over ₹255 billion (about $2.8 billion) in more than 1,370 startups, according to official data released on Saturday. The updated fund is designed with a sharper focus on deep-tech and manufacturing startups—sectors that often struggle to attract private investment due to long development cycles and high capital needs. It also aims to support early-stage founders, expand venture capital reach beyond major urban centers like Mumbai, Bengaluru, and Delhi, and strengthen India’s domestic venture capital ecosystem, especially smaller and regional funds. At the announcement, IT Minister Ashwini Vaishnaw highlighted the rapid growth of India’s startup landscape. A presentation slide showed that the number of startups in the country has surged from fewer than 500 in 2016 to over 200,000 today. In 2025 alone, more than 49,000 startups were registered—setting a new annual record. The cabinet approval follows recent regulatory changes aimed at easing burdens on deep-tech firms. The government has extended the duration of startup classification from 7 to 20 years and raised the revenue threshold for accessing startup-specific benefits—including tax breaks, grants, and regulatory exemptions—from ₹1 billion to ₹3 billion (about $33 million). The move comes just ahead of the India AI Impact Summit, a high-profile event where global tech giants such as OpenAI, Anthropic, Google, Meta, Microsoft, and Nvidia are expected to join Indian conglomerates like Reliance Industries and Tata Group. With over a billion internet users, India is a key market for global technology expansion. Despite this momentum, private capital has become more cautious. India’s startup ecosystem raised $10.5 billion in 2025—down 17% from the previous year—while the number of funding rounds dropped nearly 39% to 1,518, according to Tracxn data. Investors are increasingly selective, favoring proven teams and scalable models. Minister Vaishnaw emphasized the program’s flexibility, noting that extensive consultations with industry stakeholders, investors, and startups informed its design. The government aims to create a sustainable, inclusive innovation ecosystem capable of driving India’s long-term technological advancement.