Mint Primer: Govt’s ₹1-trillion deep tech fund: why we need it, and is it enough?

Mint Primer: Govt’s ₹1-trillion deep tech fund: why we need it, and is it enough?

The interim union budget for FY25 announced the setting-up of a 1 trillion-corpus to fund deep-tech ventures. This gives India’s nascent deep-tech sectors a shot in the arm. However, there will be challenges. Mint explains why the corpus is significant.

Why does deep-tech need govt support?

Deep-tech includes sectors that are heavily driven by engineering, research and development, and innovation. This niche area covers technologies that are yet to go mainstream. Innovation of this nature requires sizeable funds, as deep-tech has a long development phase before hitting the markets. The technologies are also of national significance, because of which developed economies invest heavily in order to not be reliant on other nations. While venture capital investments are important, the massive amounts needed make government funding key to developing foundational and fundamental deep-tech industries.

Which sectors are likely to benefit?

Semiconductors, artificial intelligence, quantum computing, and high-tech manufacturing. Globally, other sectors that get clubbed under deep-tech include aviation, climate-tech, mobility, biotics and space. India’s startup economy is the target for this fund, since domestic VCs largely offer early-stage funding that is made available in small ticket sizes. After the budget, union IT minister Ashwini Vaishnaw said the Centre will focus on certain strategic sectors to begin with, before other deep-tech sectors also get access to funds. However, the priority sectors for the Centre have not been disclosed yet.

How will the fund be made available?

The framework will be released in the coming days. Following this, select sectors will be chosen for funding. Sectors such as semiconductor development and quantum communications, which are of significant geopolitical importance, are likely to be prioritized. Other sectors will then go through a proposal-based framework of application for government funding.

How large is the Indian fund?

The 1 trillion ($12 billion) corpus is significant, but not the largest globally. In November, the European Innovation Council said in the past year it offered €1 billion (around 9,000 crore) to deep-tech ventures. The US is ahead—even without a deep-tech fund. Goldman Sachs pegs R&D spending on frontier technologies at over $120 billion annually as of 2019. Data from China’s finance ministry shows funding of a massive $273 billion in 2022 alone for deep-tech ventures.

Is this fund enough for deep-tech to grow?

Industry veterans believe the corpus is sizeable, and should be good to boost development of foundational AI models, semiconductor design, quantum communications and security, space solutions etc. However, much will hinge on how the fund is made accessible. Deep-tech startups face the biggest challenge in scaling up—the Centre can help become a customer through public-sector enterprises. The fine print will determine if the corpus would significantly impact India’s global position in deep-tech.

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Author: Shirley