India lengthens startup runway and backs deep tech with public capital

The Indian government has revised its startup framework to acknowledge the long development cycles typical of deep-technology ventures: eligible status is now extended to 20 years and the revenue cap for preferential treatment has been raised to ₹3 billion. These regulatory changes are explicitly part of a broader industrial strategy that combines policy flexibility with state-directed financing, most notably a proposed Research, Development and Innovation (RDI) vehicle sized at roughly ₹1 trillion. Designed to supply longer-tenor capital, grants and credit, the RDI vehicle is intended to operate alongside private fund managers and to reduce chronic Series A/B gaps for hardware-intensive firms. The announcement comes amid the 2026–27 budget’s bigger push on capital expenditure and targeted incentives for electronics assembly, testing and packaging; early commercial OSAT activity and first capex flows suggest the policy tilt is already producing mid‑stream capacity. Officials and market participants describe the package as a coordinated push: regulation extends the runway for firms to reach technical readiness, while budget signals and the RDI vehicle aim to mobilize capital and domestic demand. Private investors and strategic corporates have started organizing complementary pools of risk capital, indicating appetite to co-invest if public capital can credibly de-risk early follow‑on rounds. However, near-term fiscal dynamics complicate execution: a large borrowing programme and a paused bond‑lending platform could increase sovereign yield volatility and tighten liquidity, which in turn may affect how quickly and at what scale public and private financing is deployed. Industry leaders welcome the removal of an artificial graduation clock, but caution that policy clarity must be matched by rapid, transparent deployment mechanisms, procurement support and workforce and cleanroom development to translate intent into capacity. The data‑center tax-holiday and other multi‑decade incentives in the budget illustrate the government’s wider strategy of using long‑horizon policy signals to attract capital-intensive projects, but they also highlight trade-offs around fiscal cost and administrative complexity. Ultimately, the real test will be whether these instruments produce a steady pipeline of late‑stage deals, domestic supply‑chain buildout, and a cluster of firms that achieve durable global market positions. If well-governed and coordinated with state-level implementation, procurement and export pathways, the combined package could accelerate indigenously developed semiconductors, biotech platforms and advanced manufacturing; if not, the measures risk remaining signaling exercises without commensurate capital and market outcomes.