Innovation Street

INDIA’S QUEST FOR a Viksit Bharat by 2047 will inevitably move in parallel with its quest to become a technologically advanced nation. Without becoming a “tech nation”, India cannot hope to become developed `. No nation, small or large, in the last century or two has.

The Union Budget 2025 has attempted to lay the foun­dations for India to become a tech nation through four key pri­orities: first, building a vibrant R&D and innovation ecosystem; second, boosting domestic investments in startups; third, ensuring broad-based diffusion of benefits of technology; and fourth, enhancing tech-related skills and education. It has placed an especially strong em­phasis on fostering the R&D ecosystem, recognising it as a significant gap.

The Union Budget 2025 acknowledges that for India to be a research and innovation-driven tech nation, nur­turing research talent and boosting R&D spending will be critical. To that end, the Budget aims to fill key gaps.

Finance Minister Nirmala Sitharaman allocated ₹20,000 crore for the private sector-driven Research, Development and Innovation initiative. This is the first tranche of the ₹100,000 crore over five years an­nounced under the Anusandhan National Research Foundation (ANRF) fund in 2024. Under the able lead­ership of Abhay Karandikar, on leave from IIT Kan­pur, the nodal Department of Science and Technology (DST) has seen a multi-fold increase in its budgetary al­locations from ₹2,819 crore in 2024-25 to 23,290 crore. The key challenge, as highlighted by the Economic Survey as well, is whether the ANRF fund can indeed be leveraged to mobilise greater R&D spending by the private sector.

Together, the DST and the Department of Biotech­nology (DBT) under the Ministry of Science and Tech­nology are driving specific programmes across mul­tiple sectors. DST, for example, is overseeing the Vigyan Dhara scheme (outlay of ₹ 1,425 crore, up significantly from ₹331 crore) and the National Geospatial Mission. The former is tasked with driving research in fields such as sustainable energy and biotechnology, while the latter seeks to improve infrastructure development using geospatial data. Similarly, DBT has been allocated ₹2,300 crore for the Bio-RIDE scheme to support biotech research, bio-manufacturing and bio-foundry.

In 2024, under the National AI Mission, the government set up three centres of excellence (CoEs) for artificial intelligence. Focused on healthcare, agriculture and sustainable cities, these are being set up at AIIMS and IIT Delhi, IIT Ropar, and IIT Kan­pur, with the allocated ₹990 crore. The finance minister has now announced an additional allocation of ₹500 crore for a fourth CoE focused on education. The success of these CoEs will be de­termined by how much their research is actually translated into commercially scalable AI applications.

The government has announced the scaling up of Atal Tinker­ing Labs, aiming to establish a staggering 50,000 labs over the next five years, apart from the existing base of 10,000 labs. These labs aim to breed a scientific temper and a culture of curiosity and tinkering at the school level. The outlay of ₹10,000 crore over five years will expand their coverage to one-third of India’s schools.

The benefits are expected to accrue to India over the next sev­eral years and decades in the form of tech talent. These labs could help identify high-potential students and support their pursuit of careers in research or entrepreneurship. This could be a good measure of the long-term impact of these labs.

The Budget also announced the introduction of 10,000 fel­lowships over the next five years under the Prime Minister’s Research Fellowship Programme (PMRF). These fellows, hosted at institutions like the IITs and IISc, will help enhance the qual­ity of research. Nurturing research fellows could build a deep pipeline of much-needed top-tier research talent for India.

Together, these initiatives repre­sent a coherent long-term approach towards building a vibrant innova­tion ecosystem in India. Yet, the key will lie in their successful implemen­tation. Given their nascency, these ini­tiatives will need regular evaluations and necessary modifications.

After peaking in 2021-22, the last 2-3 years have seen a significant dip in venture capital investments into tech startups in India. The finance minis­ter’s announcement of a new ₹10,000 crore fund-of-funds for startups as well as a deep tech fund-of-funds to invest in deep-tech startups in the areas of space, biotech and others, is therefore very timely.

This will provide a boost to several homegrown venture capitalist firms, many of whom have earlier raised significant sums of capital from the previous allocation of ₹10,000 crore. The Indian startup ecosystem has traditionally relied largely on foreign capital. A greater balance between foreign and domestic capital will inject resilience into the ecosystem and also help fund more solutions to India-specific problems.

The Budget also acknowledged the need for greater diffusion of technol­ogy and its benefits across all parts of India. Two initiatives stand out. One, the finance minister announced the provision of identification cards and social welfare benefits through the e-Shram portal for over a crore gig workers employed by online platforms, such as Zomato and Ola cabs.

Two, urban hubs, such as Bengaluru, Delhi NCR, Hyderabad, Mumbai and Pune, have seen a great concentration of Global Capability Centres (GCCs) set up by global corporations. India is now home to over 1,700 GCCs, which employ 1.9 million people, and contribute an estimated $64.6 billion to the country’s GDP. NASSCOM has estimated this could reach $100 billion by 2030.

Given the economic and employment potential of GCCs, states such as Madhya Pradesh and Uttar Pradesh are also seek­ing their share of the pie. The Union Budget 2025 has therefore proposed a guidance framework for states to better attract GCCs. A geographic diffusion of GCCs will spread technological skills and jobs more evenly and help reduce the divide between the tech-forward states and others.

But, of course, the states need to ultimately provide the right set of incentives and support, not to mention sufficient pools of talent, for the global corporations. As a result, a guidance framework might not suffice and may eventually need to be supplemented with financial and other support.

THE BUDGET ANNOUNCED the establishment of five National Centres of Excellence for Skilling and also allo­cated ₹ 3,000 crore for the upgradation of 1,000 Industrial Training Institutes (ITIs). Plus, it has also envisioned an addition of 6,500 seats over five years in IITs set up after 2014.

These initiatives, while laudable, might not suffice in address­ing the scale of the skilling or vocational training gap that India faces. The private sector must play a bigger role, especially in the skilling (and upskilling) of India’s workforce in the age of AI.

Moreover, revamping ITIs will not be an easy task. A 2023 NITI Aayog report pointed out the various problems ailing the nearly 15,000 ITIs, including low quality of training, faculty and infra­structure; underutilisation of capacity; and unemployability of the graduates. This year’s additional Budget allocation must therefore be utilised in a targeted manner to alleviate these problems.

In addition to the priorities outlined above, India must also focus on scaling up tech infrastructure. While the finance min­ister did highlight the goal of providing internet connectivity to all government schools and hospitals, a lot more could have been done. Given the growing data consumption in India, for example, boosting data infrastructure, including subsea cables and data centres, could have been prioritised.

Overall, the Union Budget 2025 has done a commendable job of laying out the key priorities and providing the initial impetus for a technologically advanced Viksit Bharat.

artificial intelligenceFinance Minister Nirmala SitharamaninnovationOpenomics 2025start-upstechnologyUnion Budget 2025