India is actively developing homegrown capabilities in deeptech, intellectual property and product innovation — expanding beyond its traditional strengths as a global hub for technology services. This evolution is evident in a vibrant startup landscape, a deep reservoir of engineering talent and a steady focus on strategic policy initiatives.
However, translating breakthroughs in fields like autonomous vehicles & drones, artificial intelligence, defence technologies, energy security, space & quantum tech and security systems from the lab to emerging market leadership remains a complex challenge.
Learning from the experiences of frontrunners such as the US and China, the Government of India (GOI) must urgently lay robust foundations to fully realise its deeptech aspirations.
This analysis is intentionally direct, a transparent assessment of the structural gaps that hold back India’s deeptech ambitions. It is written to spark urgency for systemic reform, grounded in the conviction that India has the talent, ambition and capacity to become a global competitor in generational innovation.
Government As Grant Giver And Anchor Customer
The Government of India’s (GOI) support for deeptech is substantial in rhetoric but not yet in practice or scale. Well-wishers of the GOI will note the radical leap forward in the State’s narrative enthusiasm to promote indigenous development of deeptech capabilities, but the mechanisms to deliver tangible support are still engulfed in bureaucratic cholesterol.
We need not reinvent the wheel on how this should work and simply borrow from the successful strategies of the other $5 Tn+ economies to move at the rate required.
The technological superiority of the US has been earned over decades and it continues to attract the best minds in the world thanks to active and bi-partisan support to invest in their continued superiority.
The US, through multiple agencies like DARPA, BARDA, NSF, NASA, the Department of Defence and 20+ other grant giving vehicles has funded trillions of dollars of national R&D in universities, corporations and startups over decades. These agencies also support massive, sustained procurement to catalyse commercial maturity.
Famously, Oracle’s first customer for its relational database product in the late 1970s was the CIA. More recently anduril, a 7-year-old defence tech startup, received a series of US Department of Defence contracts: $22 Bn for augmented reality defence platforms, $642 Mn for counter-drone systems and $249 Mn for advanced air defence, allowing the company to become a globally relevant innovator almost overnight.
Investing in innovation led by your citizens and private enterprise, not just PSUs, is a proven playbook that has to form the core of India’s strategy.
China has built its playbook to become competitive with the US within three decades. It has deployed state sponsored IP & process onshoring unlike any economy before, from luxury goods and EVs to smartphones and bullet trains.
Documented case studies reveal a comprehensive strategy targeting every major sector of the global economy, with particular focus on talent and technologies critical to national security and economic competitiveness.
The FBI estimates that China’s theft of American intellectual property costs the US economy between $225 Bn and $600 Bn annually. A Wall Street Journal analysis revealed Huawei received roughly $46 Bn in state bank loans/credit lines, plus $25 Bn in tax breaks between 2008–2018, amounting to land grants, raw materials and export credit aid.
Huawei’s market leadership through state sponsorship is well documented. This playbook has been enforced across sectors, from agriculture and pharmaceuticals to automotive and defence technologies. While their methods may contravene WIPO standards and global market practices, China is now indisputably a global competitor across technology applications.
In contrast, the GOI has pursued a PSU-led focus since independence that has failed to develop an indigenous innovation ecosystem at the scale required for a $4 Tn GDP today.
Over the last decade, the new administration has made significant steps forward to reinvigorating this ecosystem development and has made admirable progress, as recently evidenced by the success of the targeted military operation in 2025.
However, budgetary allocations and the required follow-through are insufficient for the scale of the demand ahead. India’s recent INR 20,000 Cr ($2.4 Bn) allocation to deeptech, while being a good start, is still dwarfed by the scale and predictability of US and Chinese spending. Even one contract to Anduril – a startup by the US Army – surpasses India’s annual defence R&D budget.
The government’s role as grant giver, first customer, buying, integrating and de-risking procurement for game-changing local tech, remains weak. Initiatives like iDEX and the IndiaAI Mission are steps forward, but execution lags the ambition of India’s political leadership and the will of its citizens. Winning a pilot is no guarantee of scale and most programs remain limited to small grants or uncertain integration.
Without direct, large-scale government spending, India’s deeptech ecosystem will lack the financial runway to compete globally. The private sector cannot make multi-decadal bets on technology that does not yet have a commercial market. The government must act as the grant driver and anchor client, ensuring domestic deeptech companies have the space and security to innovate.
What The GOI Must Do
- Substantially increase both the size and continuity of grants and committed procurement
- Radically enhance its administration of these grants and procurement functions by a meritocratic process to select the most experienced minds of the country, especially from private enterprise
- Streamline pilot-to-procurement processes, with transparent, time-bound frameworks and long-term staff that is incentivised to deliver outcomes
- Build military and civilian testbeds in partnership with industry and universities, so startups and local innovators can test before deployment
- Embrace risk taking with its citizens and private enterprise and cease its over-reliance on PSUs and civil servant-led planning
Long-term Policy And Investor Clarity
Deeptech requires patient, multi-decadal capital, something local sources can only provide if there is regulatory and policy certainty. While Indian venture capital and family offices have grown in scale and sophistication, they still largely operate on conventional fund cycles, with return expectations within a decade.
For these investors to meaningfully back deeptech, the enabling environment must evolve. They need clarity, not just on where to invest, but on whether the policy scaffolding will exist to support and scale those companies for the long haul.
By contrast, deeptech investors in US and China operate within mature, predictable ecosystems where governments have laid out multi-decadal industrial policies, accompanied by regulatory clarity, tax incentives, safe harbour provisions and assured market creation.
The CHIPS and Science Act in the US, for instance, provides $280 Bn of federal investment in semiconductors, AI and quantum, along with five-year plans for implementation. In China, state-led guidance funds (such as the $47.5 Bn big fund or National Integrated Circuit Industry Investment Fund) combine equity investment with subsidised loans, tax incentives and government offtake agreements, giving investors long-range visibility on revenue growth and scaling opportunities.
Lack of trust in policy and process certainty afforded by the GOI needs to be repaired by the state taking the first step forward. Indian investors face a landscape of ambiguous regulatory norms, fluctuating IP rules (especially for dual-use technologies) and uncertain procurement pipelines. This results in a scarcity of the “15-year thesis” capital that builds deeptech giants.
Policy follow-through delays, such as the National Deep Tech Startup Policy, announced in 2023 but yet to be operationalised, compound the challenge. This delay only reinforces a prevailing concern among Indian long-term capital providers: that policy in India rarely translates into execution within the timeframes that innovation cycles demand.
If the GOI is serious about partnering with private enterprise and local capital, it must understand these concerns and take responsibility for building these bridges.
What The GOI Must Do
- Safe Harbour Provisions For Stability: Provide clear, long-term regulatory and incentive roadmaps across industries. Ensure protection from retroactive policy, taxation jugglery and regulatory changes to establish baseline risk mitigation. For example, making the PLI guidelines a 10-year policy with non-cancellation protections will be welcomed by immense capex investments by the country’s enterprises.
- Incentive Frameworks: Introduce tax breaks, co-investment funds and R&D grants that reward long-term investment in deeptech, energy security and National Mission aligned companies, similar to the US’s Qualified Small Business Stock (QSBS) exemption.
- Transparency: Publish a 15-year roadmap for deeptech, energy, food security, manufacturing and other priorities, giving investors confidence in the government’s vision and commitment. Codify sector-specific export, dual-use and IP support frameworks as part of these roadmaps.
Building Integrated Ecosystems: Role Of PSUs, Universities And Industry
No nation wins at deeptech without a robust innovation ecosystem. The stories of Israel’s Iron Dome, America’s defence industrial base and Make in China 2025 demonstrate the power of university-industry-government collaboration. India needs its own military industrial complex that is not solely reliant on PSUs and government employees.
Historically, India’s PSUs led closed-loop development cycles over decades and were often riddled with corruption, sabotage and failure. This can change if the GOI rearchitects PSUs into the incubators of indigenous innovation.
PSUs and agencies like ISRO, DRDO, HAL and BEL can play a transformative role by partnering with startups and private enterprise for co-development and systems integration. Universities, such as the IITs and IISc, can bridge the lab-to-market divide through incubators and technology transfer offices.
Successful models exist. Israel’s collaboration between startups and intelligence testbeds for cybersecurity, or the US’s university-industry partnerships like Stanford and Silicon Valley. Indian universities are treasure troves of research and India’s most promising talent, yet their innovations rarely reach the market and their best minds leave the country.
Major Gaps
- Systems Integration: Most Indian startups still build standalone solutions. True operational deployment requires integration with legacy defence and civilian systems, something that demands joint testbeds and standard protocols
- Testing Infrastructure: Live-fire ranges, operational networks, white hat environments and real-world test zones are inaccessible for most startups. This exposes flaws late, raising costs and eroding founder and investor confidence
- Talent And Trust: India’s founders and innovators are technically accomplished but often lack operational defence or real-world deployment experience. PSU and agency stakeholders, in turn, treat startups as outsiders, slowing adoption and collaboration.
- Constraints On Universities: India’s best academicians are over-regulated and grants move at glacial pace. India’s 2025-26 budget announced support for research fellowships in AI, but this has come three years after ChatGPT was released and we are already behind the AI arms race.
What GOI Must Do
- Deepen PSU and university partnerships for joint product development, integration labs and live testbeds. Institute founder-veteran-PSU scientist exchanges to inject operational DNA and credibility into startups. Likewise, inject private enterprise leadership into advisory and governance roles into PSUs
- We need an NPCI architecture for every deeptech and innovation vertical, from nuclear energy and space tech to materials engineering and AI
- Support modular “dual-use” architectures so innovations can serve sovereign and civilian markets. Provide clear scope on sovereign use and direct thousands of projects towards universities and corporations for immediate development
- GOI grants leadership led by private enterprise experts (much like the Aadhar and UPI missions) that can change the tempo of research on university campuses across the country.
The choice before the GOI is clear — Embed deeptech within its national policy architecture, or risk perpetual technological dependence, a position India has been in for 200 years.
For India to compete in the global innovation race, it must shift from reactive interventions to a sustained, risk-positive approach that embeds deeptech innovation into the core of state capacity and national strategy. India’s historic strength has been its talent, ambition and tenacity.
To transform these into national and global deeptech competitiveness, the government must build stronger, more agile foundations urgently.
The post India’s Deeptech Innovation: Foundation Setting For The Future appeared first on Inc42 Media.
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