A $12B R&D fund was meant to turbocharge startup funding. It did the opposite

“Instead of accelerating funding in the startup ecosystem, the RDI fund has slowed it down,” said the managing partner of a VC firm that manages a corpus of over $1 billion.

Around 12 alternative investment funds (AIF)—all managing anywhere between $35 million and $1 billion—and two non-banks The Ken spoke to agreed with this.

This is with regard to the Rs 1 lakh crore Research, Development, and Innovation (RDI) fund launched by Prime Minister Narendra Modi in November 2025. Its purpose is to provide patient capital for an area in which Indian companies’ record is abysmal—research and innovation. The focus is particularly on sectors with long gestation periods, often ignored by private venture capital. Think startups building DNA-based data storage, drone-defence systems, and satellites.

The initial timeline was ambitious. In May, Shivkumar Kalyanaraman, the CEO of the Anusandhan National Research Foundation (ANRF), the year-old body housing the RDI fund, had claimedBusiness StandardProsperity is both India's ambition and destiny: RBI dy governor Gupta that the first cheques to approved AIFs would go out “in the coming days”. The whole process was supposed to be conducted at “record speed”.

The reality has been anything but. “We submitted our application for RDI funding in January and started calling for RFPs (requests for proposals) and shortlisting startups in April,” said another Bengaluru-based fund manager. “But now, the entire funding cycle is delayed by almost a year, as we’ll have to renegotiate with private LPs after RDIF approval.” In fact, until the first week of August, over 20 additional fund managers were still “due to be appointed”.

The disbursement itself has fared no better.

For starters, the Rs 20,000 crore allocated to the RDI fund for FY26 was brought down to Rs 3,000 crore. Of this, ANRF has disbursed a mere Rs 500 crore to statutory body Technology Development Board (TDB) which has committed Rs 2192 crore to 22 shortlisted startups so far. Similarly, public-sector enterprise Biotechnology Industry Research Assistance Council (BIRAC) has committedPIBRDI FUND UNDER ANRF Rs 390 crore to eight startups, even though it’s still to receive any money from ANRF.

Lede illustration by Sakshi Modi

A $12B R&D fund was meant to turbocharge startup funding. It did the opposite