Anup Jain is the co-founder of BlueGreen Ventures.
The Indian startup ecosystem thrives on a balance of ambition, risk, and capital. Every annual budget has the potential to either accelerate this ecosystem’s growth or burden it with financial and regulatory constraints.
As of 2024, India ranks as the world’s third-largest startup ecosystem, boasting over 100 unicorns and several high-profile IPOs. Budget 2025 makes key moves that acknowledge startups’ economic significance, yet leaves some critical issues unaddressed.
A $12b stimulus to boost consumption
India’s slowing consumption just received a major boost, changing the economic mood from somber to optimistic overnight. According to a Goldman Sachs 2024 report, “Affluent Indians” (earning over $10,000 per annum) drive most consumption.
This segment, 4% of India’s population (~60 million people), is growing at a 13% CAGR and is projected to reach 100 million by 2027. With the largest personal tax relief in a decade, Budget 2025 adds $800–$1,100 per capita to at least 100 million middle-income individuals, leaving an estimated $12 billion in additional disposable income.
While this does not directly fund startups, it expands the consumer base for sectors like travel, beauty, fashion, home décor, hospitality, and retail investments (equities and real estate)—areas where startups play a key role. Increased discretionary spending will stimulate job creation and fuel new investments.
Expanding FoFs: A boost for venture capital
The Fund of Funds for Startups (FFS) receives an additional $1.2 billion, doubling the 2016 allocation. Since its inception, the fund has catalysed $10.5 billion in startup investments.
This will have two key effects:-
Empowering spin-out GPs: More rainmakers from established VC funds will launch their funds using their proven track records. Many have already done so between 2022 and 2024 (BlueGreen Ventures is one of them).
Encouraging new GPs: The CRISIL-Oister 2025 report finds that 44% of funds launched between 2022 and 2024 were led by first-time GPs.
VC 2.0 is truly here
With performance reports being now available for all incumbents, and governance being centerstage with multiple large startup blowouts that caught some VCs sleeping on their boards, prioritising FFS allocations will no doubt have to become more meritocratic over legacy first-mover advantages.
This is an industry of performance and not how many years one has been in business. This shift will bring higher industry standards and attract new Limited Partners (LPs). A Singapore-style independent selection board seen in the GIP could ensure transparency and efficiency.
Deep-Tech Fund: A Strategic Necessity
Budget 2025 introduces a ₹20,000 crore ($2.4 billion) Deep-Tech Fund of Funds, backing critical advancements in AI, quantum computing, and semiconductors. Given India’s rising import dependence on deep-tech, this fund aims to curb forex outflows and secure technological sovereignty.
Credit and Infrastructure Investments
- Enhanced Credit Guarantee: The credit guarantee for startups rises from $1.3 million to $2.5 million, with the guarantee fee reduced to 1% for loans in 27 priority sectors under Atmanirbhar Bharat.
- Urban Challenge Fund: A ₹12 billion ($1.4 billion) interest-free fund for 50 years has been allocated as first-loss capital for urban infrastructure, encouraging long-term economic development in all states to raise their own infrastructure with speed and reduce pressure on Top 10 cities
Tax Reliefs That Barely Matter
Startups can claim a full exemption on profits for three consecutive years within the first 10 years of incorporation (if set up before March 31, 2030). However, most startups operate at a loss in the early years and rely on venture capital, making this benefit largely redundant.
What’s Still Missing?
1. Late-stage exit mechanisms
India’s startup ecosystem remains highly dependent on foreign capital for late-stage funding. The Fund of Funds for Startups (FFS) should create a dedicated late-stage pool, offering exits to early-stage VC funds after 8 years, thus accelerating reinvestment and liquidity from smaller domestic pools of HNIs and family offices that support GPs in their first steps.
Singapore executes this well by investing across all startup stages through multiple Fund of Funds. India must adopt a similar model to strengthen domestic investment cycles that have been lacklustre. According to the same CRISIL report, FY14 vintage funds are still to close out fully even in 2025 and have low pooled IRRs of 18%.
2. Education infrastructure: A $60b forex drain
Indians spend $60 billion annually on overseas education—depleting foreign reserves. Yet, Budget 2025 offers no incentives for world-class domestic universities and research institutions. Retaining talent and capital within India should be a strategic priority.
3. Faster dispute resolution
Contract enforcement remains a pain point for businesses and investors alike. Startup-related disputes often end up in High Courts and the Supreme Court, facing years-long backlogs. A dedicated commercial dispute resolution system—modeled after Singapore’s arbitration framework—would provide much-
needed certainty to domestic entrepreneurs and foreign investors.
