Strengthening India’s Innovation Landscape | 10 Jul 2025

India's innovation trajectory has long been driven by a false dichotomy between state-led and private sector approaches, when in reality both are essential partners in building a robust ecosystem. While private enterprise brings agility, risk-taking capacity, and market responsiveness, the state provides critical infrastructure, regulatory frameworks, and patient capital for long-term research. The most successful innovation hubs globally demonstrate that strategic government intervention complements rather than competes with private innovation. India's recent policy initiatives in semiconductor manufacturing, space technology, and renewable energy illustrate this collaborative model in action. 

What are the Key Strides in India’s Innovation Ecosystem?  

• Government Led:  
  • Strategic Government Policies and Schemes: India's government has made substantial strides by implementing policies like Startup India, Make in India, and PLI Schemes, which actively support innovation.  
    • Startup India Hub serves as a one-stop platform connecting over 1,140 incubators and accelerators.  
    • In 2023, the Startup India Seed Fund Scheme allocated ₹945 crore to seed funding, emphasizing the government's commitment to fostering innovation and entrepreneurship across sectors. 
  • Active Push to Research and Development: The government has heavily invested in creating strong academia-industry linkages to propel R&D in India. 
    • Programs like the Atal Innovation Mission (AIM) are driving collaboration between universities and industries to create cutting-edge products.  
    • The Fund of Funds for Startups (FFS), with ₹10,000 crore backing, channels funds through venture capital firms to support early-stage startups.  
      • Additionally, the Union Cabinet recently approved a ₹1-lakh crore Research Development and Innovation (RDI) scheme that aims to incentivise the private sector to invest in basic research. 
  • Incentivizing DeepTech Development: In an effort to position India as a global leader in emerging technologies, the government has introduced initiatives focusing on DeepTech innovation.  
    • The PLI scheme for semiconductor manufacturing and Quantum Technologies aim to build self-reliance in advanced technologies.  
    • The recent announcement of ₹76,000 crore for the National Semiconductor Mission is a case in point.  
      • India’s government also introduced the IndiaAI Mission, which focuses on building AI capabilities and expanding the country’s leadership in data science and machine learning. 
  • Support for Innovation in Tier-2 and Tier-3 Cities: The Indian government has significantly expanded the reach of its innovation ecosystem to include Tier-2 and Tier-3 cities, reducing the concentration of innovation in metropolitan hubs. 
    • Through initiatives like the Atal Tinkering Labs (ATLs) and Pradhan Mantri Mudra Yojana (PMMY), smaller cities are being included in the innovation framework.  
    • According to Economic Survey 2023-24, more than 45% of Department for Promotion of Industry and Internal Trade (DPIIT)-recognized startups are emerging out of tier-2 and tier-3 cities. 
• Private Sector Led:  
  • Venture Capital and Angel Investments Fueling Growth: Private sector investments, particularly from venture capital and angel networks, are driving India’s startup ecosystem.  
    • India saw a significant surge in deep tech startups in 2023 with 480 new ventures emerging, making it the third largest pool globally.  
    • Platforms like LetsVenture and Indian Angel Network continue to provide critical early-stage funding to emerging companies. 
  • Private Sector in CleanTech: The private sector is actively driving the development of CleanTech innovations.  
    • Startups like Ather Energy, ReNew Power, and Ola Electric are leading the charge in electric vehicles and renewable energy solutions.  
    • The growing demand for sustainable tech solutions has prompted significant private sector investments in these areas.  
    • More than 63 cleantech startups have come up with unique solutions to contribute to India's SDG goals. 
  • Growth of India’s Unicorns and Emerging Sectors: The rise of unicorns and tech-driven startups is perhaps the most visible sign of private sector innovation in India.  
    • In 2022, India hit the milestone of 100 unicorns, making it the third-largest startup ecosystem globally.  
    • Companies like Swiggy and Zomato in foodtech, and Razorpay in fintech are driving India's innovation narrative.  
      • These firms have not only raised billions in funding but also expanded globally, highlighting India's growing reputation as a hub for technological entrepreneurship. 
  • Tech-Enabled Solutions in Healthcare and Education: Private players are playing a crucial role in transforming India's healthcare and education sectors through technology.  
    • Practo, 1mg, and Dozee are revolutionizing healthcare with AI-based diagnostics and telemedicine, addressing the accessibility challenges faced by millions.  
    • On the education front, India’s EdTech market is expected to reach USD 10.4 billion by 2025.  

What are the Key Issues Associated with India’s Innovation Ecosystem?  

• Regulatory Bottlenecks and Complex Compliance Frameworks: India’s innovation ecosystem is stifled by a complex regulatory environment, often hindering the speed and scalability of startups.  
  • Despite government initiatives, navigating through layers of compliance remains a challenge, particularly for new ventures in emerging technologies.  
  • In 2020, India ranked 63rd in the Ease of Doing Business Index due to stringent licensing requirements and approval delays.  
    • These delays discourage innovation, especially in fast-evolving sectors like AI and blockchain, where agility is critical.  
    • The Startup India initiative aims to streamline this, but the pace of regulatory reforms remains slow. 
• Low R&D Investment and Lack of Deep-Tech Focus: India’s R&D expenditure, at 0.7% of GDP, lags far behind global leaders such as the USA (3.5%) and China (2.4%), limiting its capacity for technological breakthroughs.  
  • While the government has set ambitious goals in Union Budget 2025 with initiatives like the Fund of Funds for DeepTech, private sector involvement remains insufficient.  
  • In 2023, India allocated ₹1 lakh crore towards R&D, but the bulk of the spending is directed at infrastructure.  
    • The private sector accounts for only 35% of the R&D investment in India while the sector contributes 75% of R&D in the US and China 

• Talent Drain and Skill Mismatch: India faces a significant brain drain, with many of its brightest minds seeking opportunities abroad due to better funding and infrastructure for research.  
  • Only 8.25% of Indian graduates work in jobs matching their education. 
  • Estimates show that only about 51.25% of the youth is deemed employable. 
• Inadequate Intellectual Property (IP) Protection and Commercialization: India faces challenges in the commercialization of intellectual property, with over 100,000 patents granted in FY24, yet a large portion remains unutilized.  
  • This gap between IP generation and commercialization is linked to insufficient awareness and weak enforcement mechanisms.  
  • While the National Intellectual Property Rights Policy aims to boost IP commercialization, the patent filing process remains time-consuming, with some waiting times extending to 5 years.  
• Funding Gaps in Early-Stage Innovation: While the venture capital scene in India has grown, there remains a funding gap for startups at the seed and early growth stages.  
  • In 2023, VC funding in India declined by 67% YoY, highlighting investors' cautious approach amid global uncertainties.  
    • Early-stage startups in DeepTech, AI, and quantum computing particularly struggle to secure funding due to perceived risks.  
  • While schemes like the Startup India Seed Fund Scheme (SISFS) offer seed capital, the funding remains insufficient to cater to India’s diverse and expanding startup ecosystem.  
• Infrastructure Gaps for Prototyping and Testing: India’s innovation infrastructure is still underdeveloped, particularly in the areas of prototyping and testing.  
  • While the government is investing in initiatives like Digital Public Infrastructure (DPI) and IndiaAI Mission, physical testing and prototyping facilities remain scarce, especially in Tier-2 and Tier-3 cities.  
    • The lack of this critical infrastructure hampers product development, slowing the commercialisation of high-tech innovations and reducing the competitiveness of Indian firms on the global stage. 
• Lack of Commercialization of Grassroots Innovations: While India excels in grassroots innovations, there is a significant gap in commercializing these solutions at scale.  
  • Innovations in agritech, clean energy, and healthcare often remain local due to a lack of visibility and market access.  
    • The collaboration between organizations like the National Innovation Foundation (NIF) and Amazon India is a step forward, but commercialization remains a bottleneck.  
  • Public-private collaborations and improved IP frameworks are essential to leverage these innovations for broader societal impact. 
• Unbalanced Growth Across Sectors: India’s innovation ecosystem has seen significant growth in sectors like foodtech, fintech and edtech, but other sectors such as manufacturing and semiconductors have lagged behind.  
  • India’s challenge lies in creating balanced innovation across all sectors, ensuring that both digital and traditional industries receive equal attention and funding. 
    • India’s Commerce Minister has urged Indian startups to shift their focus from food delivery apps to high-tech sectors like semiconductors and AI. 

What Measures can India Adopt to Enhance Public-Private Synergy in India’s Innovation Ecosystem?  

• Establish Public-Private Innovation Hubs: India can create dedicated Public-Private Innovation Hubs in key technology sectors such as AI, semiconductors, and clean energy, where the government, academia, and industry come together to co-develop solutions.  
  • These hubs should offer shared resources like testing facilities, prototype labs, and venture funds to foster collaboration at every stage of innovation. 
  • Such hubs would accelerate the commercialization of ideas, reduce R&D costs, and build cross-sector partnerships, creating a smoother pathway from concept to market. 
• Incentivize Corporate Participation in R&D: To drive deeper engagement, the government can offer targeted tax incentives for private companies investing in cutting-edge R&D and deep-tech projects.  
  • These incentives should be tied to measurable outcomes such as patents, prototypes, and industry applications.  
  • This would ensure that companies view R&D not only as a business expense but as a strategic long-term investment, which aligns private interests with national goals in sectors like healthcare, green energy, and digital technologies. 
• Strengthen Industry-Academia Partnerships: A concerted effort must be made to bridge the gap between academic research and industry needs.  
  • Public research institutions should partner with private companies to co-design curriculums, develop industry-specific research agendas, and create internship and mentorship programs for students.  
  • By aligning academic research with real-world industry requirements, these partnerships can ensure that the next generation of innovators is prepared to solve critical challenges in areas like AI, agritech, and cybersecurity. 
• Foster Open Innovation Models: India should promote open innovation models, where public and private stakeholders share resources and intellectual property to accelerate the pace of technological development. 
  • The government can act as a facilitator by creating open-access platforms where innovators, startups, and established companies can share technologies, data, and findings.  
    • This collaborative approach can unlock synergies in clean tech, renewable energy, and data science, making innovation more inclusive and efficient. 
• Create Flexible Public Procurement Mechanisms: To further integrate public and private efforts, India can revamp its public procurement policies to prioritize the purchase of innovative technologies from startups and small enterprises.  
  • By implementing outcome-based tenders and phased payment structures, the government can lower the entry barriers for startups while encouraging them to align their products with public needs.  
  • This would provide a market for emerging technologies, especially in sectors like smart cities, healthcare innovations, and sustainable infrastructure. 
• Facilitate Cross-Sector Collaborations through Industry Councils: Establishing sector-specific industry councils that bring together government bodies, private enterprises, and academia could ensure consistent dialogue and collaboration in emerging fields.  
  • These councils can act as advisory bodies to shape public policy, identify funding gaps, and direct resources to the most critical innovation areas.  
  • For instance, a CleanTech Council could drive innovations in solar power, electric vehicles, and energy efficiency, with active participation from private sector leaders and public regulators. 
• Encourage Government-Backed Private Angel Funds: The government can partner with private investors to create angel funds that focus on early-stage innovation. 
  • These funds can support startups working on high-risk, high-reward technologies, especially in deep-tech and frontier technologies. 
  • Government-backed funds would bring more credibility to early-stage investments, thereby reducing the risk for private investors.  
• Collaborative Talent Development Programs: A strong workforce is crucial for innovation, and public-private partnerships can play a key role in skill development and talent cultivation.  
  • Governments can partner with corporations to launch upskilling programs that focus on the latest technologies such as blockchain, data science, and machine learning. 
  • This could include jointly-funded fellowships, internships and certificate programs, ensuring that the talent pool is aligned with industry needs while also fostering a culture of lifelong learning. 
• Create Regional Innovation Clusters: India can further enhance public-private synergy by developing regional innovation clusters in non-metro areas.  
  • These clusters can integrate local government support with private sector resources to foster regional entrepreneurship and innovation, particularly in underserved sectors like rural agri-tech and social enterprises.  
  • By decentralizing innovation and providing resources such as funding, mentorship, and infrastructure, these clusters can boost localized solutions that can scale nationally and globally. 

Conclusion:

India must foster stronger public-private synergies to realize the full potential of its innovation ecosystem, as envisioned in the Science, Technology, and Innovation Policy (STIP) 2020. By aligning these efforts with SDG 9 (Industry, Innovation, and Infrastructure), India can drive inclusive and sustainable growth. Enhanced collaboration will accelerate breakthroughs in critical sectors like clean energy, healthcare, and technology, ensuring that India not only becomes a global innovation leader but also achieves long-term, equitable development.