Union Budget 2024: R&D, spacetech fund gives deeptech startups a boost

The govt is working on National Deep Tech Start-up Policy as part of its efforts to spur innovation in India's deeptech sector. The policy attempts to address the vital barriers facing the industry

The Union Budget 2024 has announced a slew of initiatives for India’s budding deeptech sector, including the establishment of a Rs 1 trillion research and development, and a Rs 1,000 crore venture capital fund for the space economy.

These initiatives are expected to provide the much-needed funding and early-stage support to deeptech startups in the country.

Deeptech, or deep technology, refers to the startups whose business model is based on high-tech innovation in engineering, or significant scientific advances, such as blockchain, artificial intelligence, quantum computing, etc.

Budget 2024 has announced the establishment of the Powering Innovation, Research & Development (R&D) Anusandhan National Research Fund, aimed at supporting basic research and prototype development, with a substantial financing pool of Rs 1 trillion. The fund is dedicated to spurring private sector-driven research and innovation on a commercial scale.

Furthermore, to give a fillip to the emerging space technology sector in India, the Budget has also proposed to set up a Rs 1,000 crore venture capital fund for the space economy.

“The Union Budget brings hope for deeptech startups through increased funding for R&D and innovation, which is crucial for those with disruptive ideas and longer fundraising cycles,” said Sunil Shekhawat, CEO, SanchiConnect – a community for deeptech startups.

“With entrepreneurial experience since 2012, I recognise the challenges deeptech start-ups encounter. The Budget’s strategy of combining financing, regulation, and skilling into one comprehensive approach is a masterstroke,” he said.

Budget boosts solar, nuclear initiatives

The Budget’s announcements, including the rooftop solar policy, the pumped storage policy and research and development for small and modular nuclear reactors, Bharat small reactors, and R&D for small modular reactors, have been positively received by startups.

“Especially on the nuclear side, it positions India to replicate the renaissance that nuclear is experiencing in the US,” said Mayuresh Raut, managing partner, Seafund – a deeptech-focused venture capital fund.

Startups call for patent policy reform

While the Budget has made several announcements for the deeptech sector, startups say that there is more ground to cover.

“This is recognition of the growing need for a deeptech economy. However, alongside the R&D Fund, the government should look at the Intellectual Property regime. The much overdue Patent Policy needs to come out soonest to enable maximisation of R&D Fund,” said Bhaskar Majumdar, managing partner, Unicorn India Ventures.

As of December 2023, India has as many as 117,254 startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT), 31,000 of which are technology startups, according to the recent Economic Survey 2023-24.

Of these technology startups, over 13,000 are operating in the realms of artificial intelligence, the Internet of things, robotics, and nanotechnology.

Deeptech policy nears Cabinet review

To cater to this growing number, the government had, in July last year, introduced the draft National Deep Tech Start-up Policy (NDTSP) – a comprehensive framework to tackle deep tech start-ups’ challenges.

“The policy addresses vital barriers such as limited funding, resource and infrastructure constraints, and understanding the risks associated with cutting-edge technologies,” the survey said.

Later in December 2023, the DPIIT said that consultation for the Deep Tech Startup policy was over and a draft Cabinet note was in the works. Although the Budget has no mention of the policy, the draft is expected to be tabled in the cabinet soon.

Govt efforts to boost deeptech innovation

The gestation period required for deeptech startups to develop the technology and reach market-ready maturity is considerably more than shallow technology development. Moreover, deeptech often requires a lot of early-stage funding for research and development, prototyping, validating hypotheses, and technology development.

The draft deeptech policy is part of an ongoing effort by the government to spur innovation in the country’s budding deeptech sector.

The Union Cabinet had, in March 2024, also approved an outlay of Rs 10,372 crore for five years for the India AI Mission, aimed at fostering innovation in artificial intelligence through public-private partnerships. Of this, close to Rs 2,000 crore was earmarked for financing deeptech startups, with a focus on accelerating R&D in these firms. These policies are expected to provide early-stage support to startups operating in the sector.