RDI scheme a major boost for R&D and deep-tech in India: Industry

With a two-tiered financing structure, the new RDI fund will support deep-tech ventures through the ANRF and aims to attract global talent and long-term capital

The Union Cabinet’s approval of the Research Development and Innovation (RDI) Scheme on Tuesday, with a corpus of ₹1 trillion, is being seen as a major boost for research and development (R&D) and deeptech investment in India.

 

Industry players and associations welcomed the move as a step in the right direction, given that India’s R&D investment has long been a concern. The country allocates just 0.64 per cent of its gross domestic product to R&D — far below the 2–5 per cent invested by countries such as the US, Japan, and China.

 

Many are hoping India might attempt something similar to China’s 2008 Thousand Talents Plan, which aimed to attract researchers and entrepreneurs to return home and contribute to its scientific and technological progress.

 

“The wish from the industry is for the fund to provide grants for research and to fund the commercialisation of innovation. A scheme to attract global Indian talent and allow them to set up labs in India will be a critical factor for success. This'll allow equity capital to follow up and fuel the commercialisation of Indian innovation,” said Siddarth Pai, founding partner at 3one4 Capital.

 

He added that India’s innate talent requires infrastructure and policy support to thrive and scale up the value chain. “A single-window clearance for laboratories and import of equipment will be crucial to create this ecosystem,” he said. 

 

Though the scheme was announced in the July 2024 Budget, what has excited the industry is its two-tiered financing structure.

 

Funds will flow through a 50-year interest-free loan to the Anusandhan National Research Foundation (ANRF), chaired by the Prime Minister. The ANRF will then offer long-term concessional loans to second-level fund managers, including alternative investment funds (AIFs), development finance institutions, and non-banking financial companies. These, in turn, will finance individual projects.

 

Anjali Bansal, founding partner at Avaana Capital, called it a long-awaited move. “Deeptech ventures have longer gestation periods, complex technical risks, and often don’t align with traditional venture capital timelines. India needs a broader spectrum of financing instruments — early catalytic capital, innovation-linked debt, and blended finance models that allow commercial investors to participate as the companies scale up. The challenge lies in balancing long-term investments in deeptech with short-term economic gains. Patient capital combined with strong technical and business teams focused on building fundamental unit economics can scale businesses and deliver outsized returns over time," she said.

 

Pai added that the most significant aspect of this special purpose fund is that it enables the government to deploy capital through special purpose vehicles, AIFs, and other structures in partnership with the private sector. “This marks a strategic shift, recognising that industry has a better grasp on emerging technology needs.” He also said that the fund-of-funds model has worked well in building India’s startup ecosystem. “The same model can fuel innovation, with the government as a partner.”

 

While the scheme’s framework has been unveiled, the industry is now awaiting key details, such as the criteria for fund allocation and how quickly the funds can be deployed. 

 

Ajai Chowdhry, founder of HCL and chairman of Epic Foundation, believes the fund will also enable translational research by the private sector. “Typically, under ANRF, technical education and research institutions will take ideas up to Technology Readiness Level (TRL) 4. The private sector — both corporates and startups — can then take it forward through translational research to TRL-9, for India and the world,” he said.

 

Industry players also raised concerns about the composition of the ANRF’s governing board. Several told Business Standard that a board made up solely of bureaucrats could derail the initiative.

 

“Ideally, people with global experience or those currently building products or services should be part of the board. This is going to be key. A board made up only of people from academia or bureaucracy won’t help,” said a senior executive from a venture capital firm.

 

According to the details released on Tuesday, the ANRF governing board will provide strategic direction to the RDI Scheme. Its executive council will recommend guidelines for the scheme and the selection of second-level fund managers, along with identifying scope and type of projects in sunrise sectors.

 

Changes to the scheme — including sectors, project types, or second-level fund managers — will be approved by an empowered group of secretaries led by the Cabinet secretary, the statement said. 

Giving a fillip 

• Industry hopes that India would attempt what China did in 2008 to attract talent to back
• Players welcome the move as India’s R&D investment has long been a concern
• Experts believe this scheme will enable translational research by private sector
• Executives said the fund-of-funds model has worked well for creating a startup ecosystem in India
• Analysts awaiting finer details, which include criteria to guide fund allocation