Boost For Deeptech Sector: Cabinet Approves INR 1 Lakh Cr R&D Fund

More than a year after finance minister Nirmala Sitharaman first announced a fund to spur research and development (R&D) in the sunrise sectors, the Union cabinet has approved the research development and innovation (RDI) scheme with a corpus of INR 1 Lakh Cr.

The INR 1 Lakh Cr outlay will also include the deeptech fund of funds (FoF) announced by Sitharaman in her Budget 2025-26 speech in February this year. This is the first time that the Centre has explicitly highlighted that the FoF will be part of the broader INR 1 Lakh Cr “Anusandhan” initiative.

In a statement, the government said that the RDI scheme will provide long-term financing, or refinancing, with long tenors at low or nil interest rates to spur private sector investment in RDI space.

“The (RDI) scheme has been designed to overcome the constraints and challenges in funding of (the) private sector and seeks to provide growth and risk capital to sunrise and strategic sectors to facilitate innovation, promote adoption of technology and enhance competitiveness,” it added.

Here are the four key objectives of the scheme:

• Encourage the private sector to shore up R&D in sunrise domains and in other sectors relevant to economic security, strategic purpose, and self-reliance
• “Finance transformative projects” at higher levels of technology readiness levels
• Support acquisition of technologies which are critical or are of high strategic importance
• Facilitate setting up of a deeptech FoF

While there is no clarity on the corpus of the deeptech FoF, commerce minister Piyush Goyal earlier this year pegged the quantum at INR 10,000 Cr.

How Will The Fund Operate?

The government said that the governing board of Anusandhan National Research Foundation (ANRF), chaired by the Prime Minister Narendra Modi, will offer strategic direction to the RDI scheme.

Alongside, the executive council of the ANRF will approve the scheme’s guidelines, recommend second-level fund managers, and underscore the scope and type of projects to be backed in sunrise sectors.

In addition, the government said that an empowered group of secretaries (EGoS), headed by the cabinet secretary, will be responsible for approving changes to the scheme, sectors and types of projects to be backed, and second-level fund managers. It will also be charged with reviewing the performance of the scheme.

The science and technology department (DST) will serve as the nodal department for the implementation of the RDI Scheme.

How Will Capital Be Allocated?

The Centre said that the INR 1 Lakh Cr RDI scheme will have a “two-tiered funding mechanism”. Firstly, a special purpose fund (SPF) will be established under the ambit of ANRF, which will act as a custodian of funds.

Secondly, capital from the SPF funds will be allocated to a “variety” of second-level fund managers, “mainly” in the form of long-term concessional loans. Thereafter, these fund managers can infuse funding into R&D projects in the form of long-term loans at low or nil interest rates.

“Financing in the form of equity may also be done, especially in (the) case of startups”, the statement said.

The government also noted that the fund will address the need for affordable financing and foster a self-reliant and global competitive innovation ecosystem in the country.

The Cabinet approval comes close on the heels of commerce minister Goyal’s comments at the Startup Mahakumbh 2025, where he said that the “numbers” in the Indian deeptech sector were “disturbing”. He also questioned if the founders were looking at merely “dukaandari” (shopkeeping, which may “create wealth in the short-term”) or trying to compete globally with innovations.

For context, Indian deeptech startups are marred by a slew of issues including longer gestation periods, shortage of patient capital, skewed investor focus, issues with talent retention, among others.

As per Inc42’s ‘Indian Tech Startup Funding Report, H1 2025’, advanced hardware and technology startups raised $311 Mn across 43 deals in the first six months of the ongoing calendar year.

The post Boost For Deeptech Sector: Cabinet Approves INR 1 Lakh Cr R&D Fund appeared first on Inc42 Media.