As private wallets begin to open, India's big future bet takes off

The government’s Rs 1 lakh crore Research, Development, and Innovation (RDI) programme is beginning to draw venture capital into technologies India has long struggled to finance. The trend underpins India's big future bet on turning from a large consumer of technology into a country that produces it.

The latest sign that India's deeptech push is moving beyond government policy comes from an unlikely place, the mid-tier venture capital firms. ET has reported today that firms including Antler, Bertelsmann India Investments, Jungle Ventures, Bessemer Venture Partners and Kae Capital are changing how they assess deeptech companies, bringing in scientists, technical advisers and global sector specialists. Antler says it now seriously evaluates seven to eight deeptech companies a month, against about one earlier. The private-sector response to a sector shunned by private capital so far arrives alongside the government's RDI programme, which is designed to use public capital to draw private money into technology development.

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The money is beginning to move

The government's RDI scheme is no longer a promise sitting in a Budget document. In February, the Technology Development Board opened the first RDI call for technologies at Technology Readiness Level 4 and above. Projects can receive up to 50% of their cost through loans, equity or hybrid instruments, with matching contributions from companies or private investors. The financing can carry interest rates of roughly 2-4% and tenures of up to 15 years.

By July, TDB had received Rs 500 crore from the RDI scheme and approved 22 projects with a combined project cost of Rs 4,744 crore. The RDI contribution to those projects was Rs 2,192 crore. Biotechnology Industry Research Assistance Council (BIRAC) had shortlisted another eight projects involving Rs 390.35 crore. The government says the scheme is intended to bridge the financing gap between research and commercialisation. That structure is beginning to change the behaviour of venture funds.

ET reported in May that Kalaari Capital was considering a Rs 500-600 crore deeptech fund and Blue Ashva Capital a Rs 300-400 crore vehicle. Several other fund managers were also seeking RDI capital. The model under discussion was a deeptech fund could raise roughly half its corpus from private limited partners and obtain the rest from the RDI pool.

That is different from the government simply writing cheques to startups. The state is effectively helping create a pool of patient capital that private fund managers can deploy. A startup may therefore receive investment from a VC fund whose own capital base contains both private LP money and RDI money. This is the part of the policy that could have an effect well beyond the government's direct spending.

Today's ET report captures the other half of the change. Money alone cannot make deeptech investing work. The investor has to understand whether the science works, whether the engineering can be scaled and whether the technical advantage will survive long enough to produce a business. That is why Kae Capital says it maintains a network of technical and domain experts. Bessemer is drawing on specialists in India as well as its international network. Peak XV partner Shailendra Singh has said the firm has discussed hiring academics such as physicists and biologists because of the increasingly technical companies coming through its pipeline.

This is a departure from the venture model that grew around India's consumer internet and software businesses. A generalist investor can learn a great deal about a consumer company from its customer acquisition, retention and revenue numbers. A semiconductor startup or a new materials company can look attractive on a pitch deck and still fail because the underlying technology cannot be manufactured economically.

The funding numbers show why VCs are willing to make that effort. According to Venture Intelligence data cited by ET, deeptech companies raised $574 million across 61 deals in calendar 2026, compared with $679 million across 94 startup transactions overall.

Why the timing is important for India

For years, India's technology success has been built largely around using technology rather than owning the most valuable layers of it. The country became a global centre for software services, engineering work and later global capability centres. It developed a huge pool of technical talent without developing an equivalent base of companies doing frontier industrial R&D.

India's R&D expenditure has remained around 0.7% of GDP, far below China and the US. Private sector contribution has historically been very low and Indian companies were badly underrepresented among the world's biggest corporate R&D spenders. But things are beginning to change.

For every Rs 100 spent on R&D, the govt contributes about Rs 48 while private industry accounts for Rs 45, as per latest data from 'R&D Statistics At a Glance 2025-26' by the Department of Science and Technology (DST) as reported by TOI last month. The remaining Rs 7 comes from scientific and industrial research organisations and private higher education institutions. India’s Gross Expenditure on Research and Development (GERD) breached Rs 2.4-lakh crore in 2023-24, more than three times the Rs 79,356 crore recorded a decade ago. However, overall R&D spend is still under 1% of the GDP, touching 0.8%, as per the latest figures.

Private industry’s share in GERD increased from 39.7% in 2020-21 to 45.2% in 2023-24 in just three years. During the same period, govt share declined from 54.5% to 48.2%. The report noted that private R&D expenditure has been growing at an average annual rate of around 20% over the last three years.

The RDI scheme is aimed at pushing this further by financing technologies after they have moved beyond basic research. The hardest part of technological development often comes between a promising laboratory result and a product that can be manufactured and sold.

India has plenty of scientific and engineering talent. The missing ingredient has often been the capital willing to finance that middle stage, which is now beginning to trickle in.

It's not just about deep-tech startups

The case for changing that equation is no longer confined to startup economics. Semiconductors, artificial intelligence, space systems, batteries, advanced materials, biotechnology and defence technologies increasingly determine who controls critical supply chains. Access to technology can be restricted by export controls or geopolitical conflict. Countries that depend entirely on imported technology can find that commercial vulnerability quickly becomes strategic vulnerability.

India's policy response reflects this shift. The RDI programme is part of a wider push into semiconductors, space, defence and advanced manufacturing. The government has also expanded its semiconductor programme, while private investment is flowing into data centres, electronics manufacturing and industrial technology.

Reuters reported earlier this month that India's private investment revival is increasingly reaching AI, semiconductors and advanced manufacturing. Private-sector capital investment rose 11.9% year-on-year in the April-June quarter as the economy grew 7.8%.

Deeptech therefore reflects that private investment is returning and the composition of that investment is beginning to move towards technology-intensive industries.

China offers a useful warning

China shows both the potential and the difficulty of this strategy. Its R&D expenditure is more than three times India's as a share of GDP. Chinese industrial policy has spent years combining government financing, research institutions, manufacturing capacity and private companies around strategic technologies. It has built strong domestic ecosystems in areas such as electric vehicles, solar energy and advanced manufacturing.

Earlier this month, China unveiled a five-year programme for specialised small and medium-sized companies known as "little giants". The plan calls for more government funding for early-stage companies, greater access to finance and higher R&D spending among industrial SMEs. It targets areas including new energy, advanced materials, robotics, quantum technology and embodied AI.

The lesson for India is not that it should copy China's state-led industrial model but that technological capability compounds when research, finance and manufacturing reinforce one another.

But China also shows the risk. Building industrial capacity does not automatically create profitable global companies. Chinese firms now face intense competition and overcapacity in several sectors and increasingly rely on exports to absorb production.

China is the clearest example of what happens when a country spends decades connecting industrial policy, manufacturing, research and capital. Its R&D spending is now around 2.4% of GDP, roughly three times India's, and Chinese companies have built formidable positions in electric vehicles, batteries, solar equipment, telecoms and increasingly sophisticated electronics. Government support helped create the industrial capacity, but companies such as BYD and CATL turned that capacity into globally competitive businesses. China has therefore moved well beyond having engineers and scientists. it has built an ecosystem in which research can quickly move into factories, products and global markets.

India has many of the ingredients China used, but the links between them are weaker. It has a large pool of engineers and scientists, a world-class software and services industry and a manufacturing sector that is now expanding into electronics, aerospace and other technology-intensive industries. What it has lacked is enough private R&D, patient capital and industrial companies willing to take technologies from the laboratory through the expensive stages of engineering and commercialisation. India's R&D spending remains below 1% of GDP. The RDI programme is an attempt to strengthen precisely that missing middle by putting long-term public capital alongside private money.

When Indian funds start bringing physicists, biologists and other technical specialists into investment decisions, they are doing more than chasing a new category of startups. They are helping create a financing layer between scientific research and commercial technology that India has never developed at sufficient scale.

The missing private piece is finally falling into place

The change inside venture capital is more important than another list of deeptech startups. The government can provide concessional financing and create funds and incentives. It can also open strategic sectors to private companies. But it cannot decide which technology will become commercially valuable. That requires entrepreneurs and investors willing to lose money developing things that may take years to work.

The early signs are encouraging. In February, the government said its first RDI call had received nearly 191 proposals, most from the private sector. The latest ET report now shows VCs increasing the number of companies they evaluate and hiring people capable of understanding the technology behind them.

There will inevitably be FOMO. Deeptech covers radically different businesses, from biotech to semiconductors to aerospace, and inexperienced funds could overpay for companies simply because they have an RDI-backed investment opportunity. That is a real risk. The RDI programme cannot manufacture technological breakthroughs, and VC capital cannot compensate for weak science or poor execution.

But the nature of the Indian innovation debate is changing. The question used to be why Indian companies spent so little on difficult technology. Increasingly, there is a market mechanism willing to finance companies that try.

India does not need every deeptech startup to succeed. It needs just enough of them to become durable technology companies, build intellectual property and sell products into global markets. If the RDI programme can keep bringing private capital into that process, today's shift in VC behaviour could prove to be the early stage of something larger -- an Indian economy that increasingly earns from technologies it develops and owns, rather than mainly from deploying technologies developed elsewhere.