How Rs 1 Lakh Crore RDI Fund Will Boost Innovation In India

An unheard of incentive is being offered by the Indian government for science, technology and innovation, which is to provide unsecured loans to the private sector to spur innovation. It was kick-started this month as a massive outreach program held in New Delhi, where another unprecedented event took place - a minister from the Prime Minister Narendra Modi government, Jitendra Singh, India's science minister himself, sat through an open session directly taking questions from the 500-plus private sector professionals.

For the first time in India's history, the government has extended a Rs 1 lakh crore ($12 billion) interest-free loan to the Anusandhan National Research Foundation (ANRF) to turbocharge private-sector research and development. From this corpus, Rs 20,000 crore or $2.4 billion has been allocated for FY 2025-26, signalling a bold and unprecedented move to transform India's innovation ecosystem and accelerate its march toward becoming a developed nation. The only requirement is that there has to be a matching financial outlay by the company or individual seeking the loan.

The Research, Development and Innovation (RDI) Fund, approved by the Union Cabinet on July 1, is not just another policy announcement - it is a watershed moment. Designed to incentivise private-sector participation in cutting-edge R&D, the fund aims to bridge the dreaded "valley of death" between laboratory prototypes and commercial products. If executed well, this initiative could unlock massive private investment in deep-tech sectors and position India as a global innovation powerhouse.

Prime Minister Narendra Modi, during the launch of the Rs 1 lakh crore RDI Fund at the Emerging Science, Technology and Innovation Conclave (ESTIC) 2025 in New Delhi, said, "We are focusing on ease of doing research so that a modern ecosystem of innovation can flourish in India. When science meets scale, when innovation becomes inclusive, when technology drives transformation, the foundation of great achievements is laid." 

PM Modi also emphasised the historic nature of the initiative. "This Rs 1 lakh crore is for you. It is to increase your capabilities. It is to open new opportunities for you. For the first time, capital is being made available for high-risk and high-impact projects," he said.

India's private-sector investment in R&D has historically languished far below global benchmarks. The RDI Fund seeks to change that by offering unsecured, long-term loans at low or nil interest rates, and in select cases, equity financing for start-ups. This is patient capital - designed for high-risk, high-impact projects that require longer gestation periods. The scheme focuses on sunrise sectors critical for economic security and strategic autonomy, including energy security and transition, climate action and sustainability, deep-tech domains like quantum computing, robotics, space, and semiconductors, artificial intelligence applications in agriculture, health, and education, biotechnology and bio-manufacturing, pharmaceuticals and medical devices, and the digital economy.

Jitendra Singh's message is unequivocal: "This initiative is not charity, nor benevolence - it is a spirit of comradeship. We are enabling the private sector to kick-start innovation and then expect you to take over in a big way."

"This is one of the most transformative and bold initiatives of the Government of India to support the private sector," said Abhay Karandikar, Secretary, Department of Science and Technology, adding that the fund is clearly meant for cutting-edge R&D projects which require longer gestation periods. 

"It is not for routine R&D or manufacturing, it is for innovation that can leapfrog India into the future," he said.

By incentivising private-sector participation, India aims to position itself as a global innovation powerhouse.

The RDI Fund operates through a two-tier structure. At the first level, the ANRF Special Purpose Fund acts as the custodian of funds. At the second level, deployment is managed by professional fund managers - Alternate Investment Funds (AIFs), Development Finance Institutions (DFIs), Non-Banking Finance Companies (NBFCs), and specialised bodies like the Technology Development Board (TDB) and Biotechnology Industry Research Assistance Council (BIRAC). Importantly, the RDI Fund will not fund companies directly. Instead, it empowers these managers to invest in transformative projects at Technology Readiness Level (TRL) 4 and above, ensuring innovations move beyond the lab toward commercialisation. To maintain objectivity, a TRL assessment framework has been developed in collaboration with industry bodies like the Confederation of Indian Industry (CII).

The "valley of death" refers to the critical stage where promising technologies often fail due to a lack of funding. 

Ajay Sood, Principal Scientific Advisor to the Government of India, explained, "Our goal is to take deep-tech R&D, not routine R&D, to the commercial level. The RDI Fund is the fuel to cross the valley of death. It will support projects from TRL 4 to TRL 9, enabling innovators to move from prototypes to market-ready solutions." 

This approach is a departure from traditional government grants, which often focus on early-stage research. By targeting mid-to-late-stage development, the RDI Fund addresses a structural gap in India's innovation ecosystem.

India's bold move comes at a time when its innovation credentials are steadily improving. The country ranks 38th in the Global Innovation Index 2025, sixth globally in intellectual property filings as per WIPO 2023, and has climbed to 49th in the Network Readiness Index 2024 from 79th in 2019. India is also placed third globally in research publications. These metrics underscore India's growing scientific prowess. 

The RDI Fund, coupled with initiatives like the National Quantum Mission - Rs 6,003 crore over eight years - could accelerate this momentum and cement India's position among the world's leading innovation economies.

Jitendra Singh framed the initiative as part of a larger ecosystem, saying, "This fund complements missions in semiconductors, AI, and clean energy. If all goes well, the RDI Fund will catalyse private-sector investment in R&D and take India toward becoming a developed country." 

His emphasis on trust and partnership reflects a paradigm shift in government-industry relations. By offering unsecured loans - a rarity even in advanced economies - the government is signalling confidence in India's innovators.

The success of the RDI Fund will hinge on industry uptake, efficient fund management, and the ability of projects to achieve TRL milestones and scale commercially. If these challenges are met, India could witness a surge in deep-tech innovation - from quantum computing to green hydrogen - propelling the nation toward its Viksit Bharat vision. As Karandikar summed it: "This fund is not just about money - it's about building an ecosystem where innovation thrives. It's about giving Indian innovators the confidence that the government stands with them."

The RDI Fund is more than a financial instrument; it is a statement of intent. It reflects India's ambition to lead in technologies that will define the future. If this Rs 1 lakh crore push succeeds, India will not just innovate - it will lead.