Union Budget 2025: Major Boost For Startups, Deeptech, And AI Innovation In India


AIFs for startups have received commitments of more than Rs91,000 crore. These are supported by a fund of funds set up by the Government of India with a contribution of Rs10,000 crore.
Image: ShutterstockAIFs for startups have received commitments of more than Rs91,000 crore. These are supported by a fund of funds set up by the Government of India with a contribution of Rs10,000 crore.
Image: Shutterstock

 

Finance Minister Nirmala Sitharaman unveiled a series of initiatives to push India’s startup ecosystem forward. These measures aim to address challenges faced by startups, including access to funding, tax regulations and infrastructure development.

The announcements include a fresh infusion of Rs10,000 crore into the Fund of Funds Scheme (FFS), which provides capital to Sebi-registered Alternative Investment Funds (AIFs) that invest in startups. The move is expected to catalyse innovation across sectors like deeptech, AI, fintech, health tech and clean energy.

“AIFs for startups have received commitments of more than Rs91,000 crore. These are supported by a fund of funds set up by the Government of India with a contribution of Rs10,000 crore. Now a New Fund of Funds scheme with an expanded scope and a fresh contribution of another Rs10,000 crore will be set up,” Sitharaman said.

The Fund of Funds for Startups Scheme was approved and established in June 2016 with a corpus of Rs10,000 crore to lift the Indian startups and enable access to domestic capital. The scheme is operationalised by the Small Industries Development Bank of India (SIDBI).

Under FFS, the scheme does not directly invest in startups; instead, it provides capital to Sebi-registered AIFs, known as daughter funds, which in turn invest money in growing Indian startups through equity and equity-linked instruments. SIDBI has been given the mandate to operate this fund through a selection of suitable daughter funds and overseeing the disbursal of committed capital. AIFs supported under FFS are required to invest at least twice the amount committed under FFS in startups.

The finance minister also announced a Rs20,000 crore investment to drive private sector-led research, development and innovation, which could be a game changer for India’s sunrise deeptech sector. The initiative to establish a dedicated Fund of Funds for deeptech startups is a pivotal move to ameliorate innovation in sectors requiring substantial R&D and long-term investment, explains Nilaya Varma, co-founder of Primus Partners. This approach aligns India with global leaders like the US and Europe, where deeptech funding has seen significant growth, nearly double in some cases, driven by advancements in AI and other emerging technologies, he adds.

Also read: Budget 2025: Can the National Manufacturing Mission help turn India into a global manufacturing hub?

India aims to provide patient capital essential for deeptech ventures, which often face challenges in securing traditional funding due to longer gestation periods and higher technical risks. “Taking this as a good sign, the additional allocation is a blueprint to place India at the forefront of quantum computing, AI, biotech and advanced manufacturing, making it a significant contributor to global technological advancements,” says Varma.

The Union Budget also includes the extension of the period of incorporation by five years for startups, providing them with more time to establish and grow their businesses. The government also plans to increase the credit guarantee for startups from Rs10 crore to Rs20 crore, with the guarantee fee being moderated to 1 percent for loans in 27 focus sectors.

Additionally, the government plans to establish three Centres of Excellence in AI for the education sector, with a total allocation of Rs500 crore. This initiative aims to integrate AI into educational frameworks, enhancing learning outcomes and fostering innovation among students.

“This allocation is a transformative step toward integrating AI-driven solutions into learning frameworks and equipping the workforce of tomorrow with future-ready capabilities. It is encouraging to see AI increasingly recognised as a core driver of productivity and competitiveness, and this investment will accelerate India’s position as a global leader in AI innovation,” says Sindhu Gangadharan, MD of SAP Labs India.

The establishment of five National Centres of Excellence for Skilling, in collaboration with global expertise, is another critical move that will strengthen India’s workforce for ‘Make in India’ and ‘Make in India for the World’. As digital adoption surges, specialised skills in cloud, AI and enterprise technology will be critical to sustaining India’s leadership in the global technology economy. With over 1.9 million professionals employed by GCCs in India, continued investment in skilling initiatives will not only drive business growth but also contribute to broader societal progress, adds Gangadharan.



Source link

Leave a Comment