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RDI scheme a major boost for R&D and deep-tech in India: Industry
Industry players and associations welcomed the announcement as a step in the right direction. India's R&D investment has long been a concern, with the country allocating only about 0.64 per cent of its GDP—significantly lower than the 2–5 per cent invested by countries such as the US, Japan and China.
Many hope India will also attempt what China did in 2008 under its 'Thousand Talent Plan' to attract talent back to the country. The programme aimed to bring researchers and entrepreneurs home to contribute to the scientific and technological journey.
'The wish from industry is for the Fund to provide grants for research and 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 will allow equity capital to follow and fuel the commercialisation of Indian innovation,' said Siddarth Pai, founding partner, 3One4 Capital.
He added that India's innate talent requires infrastructure and policy support to thrive and move up the value chain. 'A single-window clearance for labs and import of equipment will be crucial to create this ecosystem,' he said.
The scheme, announced in the July 2024 Budget, has excited the industry because of the two-tiered financing structure it proposes.
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 such as alternative investment funds, development finance institutions and non-banking financial companies. These, in turn, will finance individual projects.
Anjali Bansal, founding partner of Avaana Capital, said this was a much-awaited move: 'Deep-tech 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. The challenge lies in balancing long-term investments in deep tech with short-term economic gains. Patient capital, combined with strong technical and business teams focused on fundamental unit economics, can build a scaled business and deliver outsized returns over time.'
Pai said a significant aspect of the special-purpose fund was that it enables the government to deploy capital through special purpose vehicles, AIFs and other instruments in collaboration with the private sector. 'This marks a strategic shift, recognising that industry has a better grasp of emerging technology needs,' he said.
He added that the fund-of-funds model has worked well in developing the startup ecosystem in India. 'The same model lends itself to fuelling innovation with the government as a partner.'
While the scheme's structure has been announced, the industry is now awaiting finer details—including the criteria for fund allocation and the timeline for disbursement.
Ajai Chowdhry, founder of HCL and chairman of the EPIC Foundation, said the fund would also enable translational research by the private sector. 'Typically, under the ANRF, technical and research institutions will take innovation up to TRL-4 (technology readiness level). The private sector—both corporates and startups—can then take it to TRL-9 for India and the world,' he said.
Industry players also raised concerns over the composition of the ANRF's governing board. Several told Business Standard that a board comprising only bureaucrats could derail the initiative.
'Ideally, people with global experience or those currently building products or services should be part of the board. This will be key. A board made up only of academics or bureaucrats will not help,' said a senior executive at a venture capital firm.
According to the details released on Tuesday, the ANRF's governing board will provide overall strategic direction to the RDI scheme, while its executive council will recommend guidelines for the scheme and second-level fund managers, as well as define the scope and types of projects in sunrise sectors.
Changes to the scheme, sectors or project types—as well as changes to second-level fund managers—will be approved by an empowered group of secretaries led by the Cabinet Secretary, the statement said.
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