The Union Budget recently highlighted a commitment to advancing new and emerging technologies, with Finance Minister Nirmala Sitharaman unveiling a national framework for Global Capability Centres (GCCs), a Rs 500-crore Centre of Excellence in Artificial Intelligence (AI) for education, and plans to explore a deep tech ‘Fund of Funds’ aimed at supporting next-generation startups.
A proposed ‘Fund of Funds’ will feature an expanded focus and a fresh infusion of Rs 10,000 crore, poised to boost investments in various sectors.
The government will also establish a national framework to guide states in promoting GCCs, particularly in emerging Tier-2 cities. This framework will propose strategies to enhance talent availability, improve infrastructure, initiate bylaw reforms, and foster industry collaboration.
“In 2023, I announced three Centres of Excellence in Artificial Intelligence focused on agriculture, health, and sustainable cities. Now, we will create a Centre of Excellence in Artificial Intelligence for education, with a total investment of Rs 500 crore,” stated Sitharaman.
Startups are set to benefit from a new ‘Fund of Funds’ which will have a broader mandate and an additional allocation of Rs 10,000 crore.
“Alternate Investment Funds (AIFs) for startups have garnered commitments exceeding Rs 91,000 crore, bolstered by a government-sponsored Fund of Funds of Rs 10,000 crore. A new Fund of Funds will further expand this initiative with a fresh contribution of Rs 10,000 crore,” she explained.
Gopal Jain, Managing Partner at Gaja Capital, regarded the introduction of a new Fund of Funds for AIFs and the Centre of Excellence for AI in Education as “promising steps” towards building a knowledge-driven economy.
To enhance access to capital, the credit guarantee coverage for startups will be increased from Rs 10 crore to Rs 20 crore, with the guarantee fee reduced to 1% for loans within 27 crucial sectors for Atmanirbhar Bharat.
Bruce Keith, Co-founder and CEO of InvestorAi, noted that while specifics regarding the deep tech funds are forthcoming, it’s essential to consider the potential impact of small capital infusions on agile and innovative teams.
“We anticipate that the venture capital ecosystem will accelerate funding momentum for these enterprises,” Keith added.
Notably, the landscape for GCCs in India has been evolving over the past five years, with the number of such centres climbing to over 1,700 in FY24, bringing the total to 2,975.
Jaspreet Singh, Partner and GCC Industry Leader at Grant Thornton Bharat, emphasized that the budget’s emphasis on expanding talent and infrastructure in Tier-2 cities represents a crucial step toward enhancing India’s GCC ecosystem.
“By broadening access to a diverse talent pool, including those who prefer to remain in their hometowns, this initiative will bolster workforce stability and retention. Improved infrastructure will facilitate seamless operations, making Tier-2 cities attractive for high-value global work,” Singh commented.
As GCCs develop into strategic hubs for innovation and technology, the expansion aims to promote inclusive growth, bridge regional disparities, and position India as a global leader in digital and business services, according to Singh. A well-distributed GCC network will contribute to long-term resilience, scalability, and global competitiveness.
“The establishment of the Deep Tech Fund of Funds will invigorate India’s deep-tech entrepreneurship and enhance its global standing in the AI arena. The increase in credit guarantee coverage for startups will further address ongoing capital access challenges,” stated Prabhu Ram, VP at CyberMedia Research’s Industry Research Group.
“Currently, India has the smallest talent demand-supply gap and is on track to achieving a skilled talent surplus by 2030. The expansion of IITs and the introduction of AI Centres of Excellence (CoEs) will strengthen India’s capabilities in emerging technologies, particularly in AI. Additionally, the PM Research Fellowship Scheme will facilitate innovation by providing 10,000 fellowships over the next five years at distinguished institutions like IITs, NITs, and IISc,” he added.
