The Union Budget 2025-26 has reinforced the government’s commitment to fostering India’s thriving startup ecosystem, which is the third largest in the world.

With startups being crucial in the country’s economic growth and innovation landscape, the budget has introduced significant financial support and policy measures to accelerate their progress.

After a challenging phase of funding winter marked by mass layoffs and shutdowns across 2022 and 2023, the Indian startup ecosystem has shown signs of revival in 2024. According to the ‘Annual Funding Report 2024’ by Inc42, homegrown startups secured over $12 Bn in fresh investments, which was a steep 20% increase from the $10 Bn they had raised a year back. This upward trend set an optimistic tone for 2025, which was firmed up further by the budget boosters.

Finance Minister Nirmala Sitharaman in her budget speech today (1 February) announced an expansion in credit guarantee cover and a INR 10,000-Cr government-backed Fund of Funds to catalyse flow into Alternate Investment Funds (AIFs).

The budget also introduced a scheme providing term loans of up to INR 2 Cr for five lakh first-time women, Scheduled Castes (SC) or Scheduled Tribes (ST) entrepreneurs for the next five years, building upon the success of Stand-Up India.

Sitharaman’s eighth budget could be a game-changer, especially for early-stage startups in the deeptech domain that often struggle for investor attention. According to experts, these measures will drive innovation, bolster deep-tech growth, and create a more inclusive entrepreneurial landscape.

Doubling Of Fund Of Funds

One of the most appreciated moves in the budget was doubling the corpus for Fund of Funds for Startups (FFS) scheme, adding INR 10,000 Cr to the existing INR 10,000 Cr kitty. “The Alternate Investment Funds (AIFs) for startups have received commitments of more than INR 91,000 Cr. These are supported by the Fund of Funds set up with a government contribution of INR 10,000 Cr. Now, a new Fund of Funds, with expanded scope and a fresh contribution of another INR 10,000 Cr will be set up,” Sitharaman said.

“My take is that this fund should be deployed more towards start-ups that struggle to........

© Inc42