In the Union Budget 2025-26, Finance Minister Nirmala Sitharaman announced the establishment of a Centre of Excellence in Artificial Intelligence for education, allocating ₹500 crore to this initiative. This move underscores India’s commitment to advancing its position in the global AI landscape.
India’s AI sector has been experiencing rapid growth. The government’s focus on deep tech is evident through the creation of a Fund of Funds (FoF) aimed at enabling investments in highly innovative startups. This initiative is designed to position India competitively in the global AI race. Bhaskar Majumdar, Managing Partner at Unicorn India Ventures, emphasised that this move reflects the government’s recognition of innovation as central to economic growth, especially as global dynamics increasingly revolve around AI and semiconductors.
In addition to the Centre of Excellence, the budget introduces the Krishi Dhan Dhanya program, which aims to integrate AI practices into the agri-tech startup ecosystem, fostering further innovation. Mayuresh Raut, Managing Partner at Seafund, noted that while this requires substantial and patient capital, it aligns with the global resurgence in nuclear energy and opens the sector to private investors. He added that, “Push for data centres consuming huge powers will need nuclear power which will further fuel our AI aspirations.”
The budget also proposes a ₹20,000 crore investment to drive private sector-led research, development, and innovation in deep tech. Anirudh A. Damani, Managing Partner at Artha Venture Fund, described this as a game-changer for India’s deep tech ecosystem. He praised the move, calling it “a step in the right direction.” Reflecting on past initiatives, he noted that the initial ₹10,000 crore Fund of Funds for Startups (FFS) commitment mobilized over ₹91,000 crore in startup funding. He anticipates that this deep tech initiative could catalyze ₹1-1.5 lakh crore in new investments into transformative sectors like space tech, AI, and advanced manufacturing, positioning India to create globally competitive deep tech giants.
Bruce Keith, Co-founder and CEO of InvestorAi, welcomed the government’s series of boosters for the Indian startup sector, particularly the ₹10,000 crore Fund of Funds, which he believes will play a key role in boosting domestic capital in the startup sector. Keith noted how Chinese AI startup DeepSeek has been able to do wonders with a low capital, saying “The announcement on deep tech fund, while details are awaited, it should be viewed through the DeepSeek lens of what can be done with relatively small amounts of capital when provided to agile and creative teams.”
Sridhar Parthasarathy, Co-Founder & General Partner at Bluehill.VC, also expressed his delight for the announcement of Fund of Funds, calling it “a strong commitment to ultivate an entrepreneurial ecosystem and an acknowledgement of Alternative Investment Funds (AIFs) in channeling these resources effectively.” He also highlighted the plan for a new Deep Tech Fund of Funds as a crucial step towards advancing deep tech innovation in India, signaling the government’s clear intent to position the country strongly in the global AI race.
Ankur Mittal, Co-Founder of Inflection Point Ventures, welcomed the improved credit platform and framework for startups, noting that this will allow them to grow and build sustainable businesses without relying solely on equity infusion. He believes that the additional cash will strengthen their capacity to attract follow-on growth capital and make important investments in operations, personnel, and technology. He emphasised that this action boosts job creation, accelerates startup growth, and creates long-term value in the ecosystem by resolving financial limitations.
These initiatives are set against a backdrop of India’s rapidly expanding AI market, which is projected to reach $17 billion by 2027, growing at a CAGR of 25-35% according to a report by Nasscom and BCG.
The establishment of the Centre of Excellence in Artificial Intelligence for education, coupled with substantial investments in deep tech and supportive policies, underscores the government’s commitment to fostering innovation and maintaining competitiveness in the rapidly evolving AI sector. As these initiatives unfold, they are expected to significantly enhance India’s capabilities in AI research, development, and application, solidifying the country’s position as a global leader in technology and innovation.
