Can India's New RDI Scheme Unlock the Startup Potential in Sunrise Sectors?

In a landmark move aimed at propelling India into the global deep-tech race, the Union Cabinet has approved the Research Development and Innovation (RDI) Scheme, earmarking a whopping ₹1 lakh crore to support startups and industries working in sunrise sectors like quantum computing, robotics, and artificial intelligence.

The scheme, which was approved on July 1, is designed to boost domestic manufacturing, create high-skill jobs, and help acquire critical technologies — a move widely viewed as a strategic step in making India self-reliant in cutting-edge technologies.

Plugging India’s R&D Deficit

India’s current R&D expenditure stands at just 0.65% of GDP, far below the global average of 2.7%, and significantly behind innovation powerhouses like:

The low participation of private capital in India’s R&D ecosystem has long been a concern, largely due to the perception of R&D as a "cost" rather than a long-term "investment". The RDI scheme aims to change that mindset by incentivizing innovation in the private sector.

“Investment in R&D is important for private sector firms and startups as it helps bring new products and services into the market,” a government official said.

Long-Term, Low-Interest Capital for Deep-Tech Startups

A key differentiator of the RDI scheme is its flexible financing options, especially targeted at startups:

• Long-term or refinancing loans with low or nil interest

• Equity investments, particularly in startups

• Support from a Deep Tech Fund of Funds, to be managed by second-level fund managers

Already, ₹20,000 crore has been allocated for this fiscal year in the Union Budget, and additional capital is expected through private sector participation.

Who Will Implement It?

The scheme will be governed and monitored by a multi-layered structure:

The government will provide a 50-year interest-free loan to a Special Purpose Fund under ANRF, which will further channel funds to second-level fund managers such as AIFs, NBFCs, and Focused Research Organisations.

Each second-level fund manager will have an independent investment committee made up of private sector, academia, technology, and finance experts, ensuring decisions are strategic and non-bureaucratic.

What's in It for Startups?

Startups in deep-tech and advanced manufacturing now have access to:

• Structured financing without the traditional risk aversion of banks or VCs

• Opportunity to participate in national strategic projects

• Support to scale innovation without equity dilution pressures

Moreover, any ministry can nominate a technology to be considered under the scheme, allowing sector-specific innovation goals — from healthcare to climate tech — to be incorporated flexibly.

The success of the scheme hinges on swift execution, transparent fund management, and the ability to attract private capital. If implemented well, the RDI scheme could be India’s most ambitious step yet toward building a self-sustaining and globally competitive R&D ecosystem.

Startups, now's the time to think beyond MVPs and go deep into R&D. The support structure is finally in place — the next wave of unicorns might just come from a lab!