RDI Fund: India’s technology ambitions have run ahead of its research spending for years. Gross expenditure on research and development was just 0.64% of the GDP in 2021, with private companies accounting for only 36.4% of the total. This means the bulk of the cost of developing technologies fall on the government.
The Union Cabinet approved the ₹1 lakh crore Research, Development and Innovation Fund on July 1, 2025. The scheme was launched in November 2025 with a six-year corpus, after the 2025-26 Budget earmarked ₹20,000 crore for it. The Fund addresses a familiar financing problem. Technologies with long development periods and uncertain commercial prospects find it harder to raise money than businesses that can demonstrate revenues within a few years.
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A semiconductor technology may require several years of development before commercial production. Drug discovery can absorb large sums well before a product earns revenue. Quantum technologies and advanced materials face similar funding problems. Venture funds work within finite investment periods, while banks usually look for cash flows or assets against which they can lend. Many deep-technology businesses have little of either when their capital requirements begin to rise.
This financing shortage often appears after laboratory research has produced a viable technology. Commercialisation requires prototypes, testing, certification, manufacturing processes, customer trials and additional capital. At this stage, scientific risk may have fallen, but commercial risk remains substantial. The funding requirement can therefore increase before the company has enough evidence to satisfy conventional lenders.
RDI Fund puts professional investors in charge of allocation
The government has chosen to route the RDI corpus through a Special Purpose Fund housed in the Anusandhan National Research Foundation. Second-level fund managers will make the investment decisions. They can include alternative investment funds, development finance institutions, NBFCs and specialised research organisations. The available instruments include long-term loans and equity, as well as contributions to investment funds that finance eligible technologies.
Projects generally have to reach Technology Readiness Level 4 before they qualify. RDI financing can cover up to half of the assessed project cost, leaving promoters or commercial investors to provide the balance. This requirement gives fund managers an incentive to find projects capable of attracting capital from outside the scheme.
The selection rules give 80% weight to the quality of the fund manager and 20% to cost. Investment experience in R&D-intensive technologies and the ability to mobilise private money count towards the quality score. For AIFs, the government participates as a limited partner rather than selecting portfolio companies itself.
Implementation has begun. By July 23, 2026, the Technology Development Board and the Biotechnology Industry Research Assistance Council had each been sanctioned ₹1,000 crore. TDB had approved 22 projects involving a total project cost of ₹4,744 crore, with proposed RDI support of ₹2,192 crore. BIRAC had shortlisted eight projects seeking ₹390.35 crore. The government had also received 162 applications from AIFs and 38 from focused research organisations seeking to participate as fund managers.
Private R&D investment will show whether the model changes the market
Government money can lower the risk for private investors. The scheme will have achieved little, however, if investors replace money they would have committed anyway with cheaper public capital.
The selection framework takes account of the private capital that fund managers can mobilise. That should remain an important criterion after the first allocations are made. A manager receiving repeated public allocations while bringing little new private money into R&D would leave the underlying financing problem largely unchanged.
The destination of the money requires equal scrutiny. Companies working in artificial intelligence, robotics or other fashionable sectors do not automatically qualify as serious technology businesses. Technology Readiness Levels offer one screening device, but investment decisions still depend on technical and commercial judgement. Fund managers have to assess whether intellectual property can be defended, whether production is feasible at an acceptable cost, and whether a market exists for the product.
Such assessments cannot be reduced to the conventional venture-capital measures used for software or consumer businesses. A company may have no meaningful revenue when the crucial investment decision has to be made. Fund managers therefore need access to people who can judge the underlying science and the cost of taking it into production.
Failure presents a harder administrative problem. Some technologies financed by the RDI Fund will fail because the science proves inadequate. Others may lose their commercial case when a competing technology becomes cheaper. A product can also work technically and still fail to find enough customers.
Public investment brings audit and accountability. Those safeguards should examine how an investment was approved, whether conflicts of interest were handled and whether the project met the scheme’s eligibility rules when the decision was taken. Commercial failure alone cannot establish that a fund manager made an improper investment.
If every failed project leads to an investigation into the original investment decision, fund managers will respond by choosing companies that are easier to defend before auditors. That would favour safer projects even where the purpose of the scheme is to finance technologies that private capital considers too uncertain.
The Fund’s performance can eventually be judged from measurable outcomes. Private R&D spending should rise if government capital succeeds in drawing new investors into the sector. Technologies financed during development should move into commercial production, while companies that succeed should be able to raise subsequent rounds without depending indefinitely on the scheme.
India has committed substantial public money to a financing gap that has constrained commercial research for years. The allocations now being made will show whether the scheme can create a larger private market for research finance or remain another source of government capital for companies that would have raised money elsewhere.