By Sriram Viswanathan

In the wake of shifting geopolitical conditions and global challenges, India’s growth story has been nothing short of phenomenal. The first advance estimate for the fiscal year 2023-24 brings forth an optimistic outlook for India’s Gross Domestic Product (GDP) growth, forecasting an impressive 7.3 per cent. expansion, surpassing the preceding year’s 7.2 per cent. This positive momentum reflects the effectiveness of economic policies, strategic investments, and the adaptability of the Indian economy.

Despite the headwinds of global challenges, the recovery witnessed in India’s industry and services sectors is indicative of the nation’s resilience. One of the primary drivers of India’s growth lies in its ability to foster innovation, and deep tech is at the forefront of this paradigm shift. 

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Deep Tech – Driving India’s Growth Story

As the country stands at the intersection of technological innovation and economic development, deep tech is poised to have a profound impact on various sectors of India’s economy. With over 3,000 startups and a Compound Annual Growth Rate (CAGR) of 53%, this sector has not only witnessed rapid expansion but has also matured significantly, contributing substantially to India’s technological prowess, thanks in many ways to the efforts of the Modi Government under the leadership of Honorable IT and Railways Minister Ashwini Vaishnav. 

Deep tech encompasses a spectrum of cutting-edge technologies such as artificial intelligence, machine learning, blockchain, and biotechnology, among others. Emerging as an established asset class, deep tech start-ups today hold a transformative power to tackle complex global issues in climate and sustainability, life sciences, security, etc. The depth and breadth of deep tech innovation are catalyzing breakthroughs in healthcare, clean energy, electric mobility, finance, agriculture, manufacturing, and more – offering the potential to not only improve lives but also help to make India’s economy globally competitive for years to come. As a venture capital investor focused on deep tech, it is also why my firm Celesta Capital is planning to double down on our investments in India in the year ahead.

Interim Budget Expectations of the Deep Tech Startup Ecosystem

Now, as Honorable Finance Minister Nirmala Sitharaman prepares her 6th budget, there is a collective expectation for policies that align with the India@100 vision, particularly from within the deep tech ecosystem. Below are a few recommendations that have the potential to jumpstart India’s emerging tech sectors. 

Fund of Funds for Deep Tech

Fundamentally, a Fund of Funds (FoF) operates as a strategic investment model. In the context of deep tech, this model becomes a conduit for channelling patient capital to ventures that demand a longer investment period. Deep-tech innovations, by virtue of their complexity and transformative potential, require sustained financial support throughout their development journey. Patient capital thus becomes indispensable during these periods of intensive research and testing. Establishing a dedicated FoF facilitates not just diversification or risk-sharing, but also empowers a greater number of deep tech entrepreneurs. 

Skilling Initiatives for Deep Tech Workforce

The success of the deep tech sector is intricately tied to a skilled workforce. While India has a large pool of tech talent, the demand for skilled scientists, engineers and researchers with expertise in deep tech has experienced an exponential surge with industries increasingly embracing AI and other critical technologies. 

Considering the rapidly evolving nature of tech, expectations call for financial support for academic and training programs, bridging the talent gap and cultivating a pipeline enriched with future-forward technical skills. By prioritizing skilling initiatives, the government can ensure that the workforce remains agile and equipped to navigate the complexities of the evolving deep tech landscape. 

A Robust Regulatory Framework for Emerging Technologies

As technologies continue to advance at an unprecedented pace, a well-defined regulatory environment becomes a foundational pillar for promoting responsible development and fostering trust. In this context, the recently introduced National Deep Tech Startup Policy (NDTSP) serves as a roadmap for creating a supportive ecosystem. 

From proposing an increase in Gross Expenditure on R&D to creating seamless partnerships between academic institutions, research labs and industry to facilitate targeted long-term funding and shared infrastructure for deep tech startups, the policy aims to harness India’s deep tech prowess.  By strategically building upon existing program and bringing these proposals to fruition, the government can create a robust and inclusive funding ecosystem for India’s burgeoning deep tech landscape.

Focus on Manufacturing 

Manufacturing-led growth is imperative to build a $5 trillion economy. Accounting for about 15 per cent of India’s GDP and employing around 12 per cent of the country’s workforce, the growth of domestic manufacturing enlists the participation of every stakeholder. By extending PLIs to cover wider segments of the manufacturing sector, the government can strategically target industries with high growth potential. Incentivizing the production of high-value goods will be important in positioning manufacturers as contenders in global markets. 

Investing in the development of a robust deep tech ecosystem transcends immediate financial considerations. It is an investment in the future—a commitment to fostering innovation, driving economic growth, and securing a competitive advantage on the global stage. The dividends extend far beyond the short term, promising a legacy of technological leadership and economic resilience for decades to come. 

Sriram Viswanathan is the Founding Managing Partner at Celesta Capital. Views expressed are the author’s own.