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December 9, 2025
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- Sun, 14 December 2025
India has the opportunity and the responsibility to shape a new GenAI paradigm that is open, inclusive, deeply grounded in real-world utility, and globally respected for its ethics and engineering excellence, a report by NASSCOM states.
India’s generative AI startup ecosystem has grown very quickly, with the number of startups increasing 3.7 times to over 890 in the past year, according to a new report. Much of this growth comes from application-focused GenAI startups, which have increased four times to more than 740 and now make up about 83 percent of the total.
Many startups are also changing their business direction, with 63 percent having shifted their models in the first half of 2025 compared to 47 percent during the same time last year. Most of these changes focus on software-as-a-service products, AI tools for specific industries, and business models that can succeed faster in the market.
Even with this rapid growth, funding remains a challenge. Indian GenAI startups have received 30 percent more funding compared to last year, reaching 990 million dollars in the first half of 2025. However, this amount is still much lower than what startups in other countries are getting, showing that the investment environment in India is still tight.
India’s GenAI funding landscape has contracted sharply over the past two years. In CY2023, total funding stood at 319.9 million dollars across 78 deals, with Seed-stage funding at 70.9 million across 65 deals, Early-stage at 134 million across 11 deals, and Late-stage at 115 million with just 2 rounds.
By CY2024, total funding dropped to 190.1 million across 65 deals, with Seed funding declining to 51.1 million, and Late-stage investment falling to zero. The first half of CY2025 continued this downward trend, with only 122 million raised across 18 deals.
Seed-stage saw just 16 million from 13 rounds, while Early-stage held relatively strong at 106 million across 5 rounds. Late-stage funding has remained absent for two consecutive periods, indicating a major retreat of large capital from the GenAI ecosystem.
One of the defining trends in the evolution of India’s GenAI startup ecosystem in 2024 and 2025 is the growing focus on verticalization. Startups are increasingly shifting toward building domain-specific AI solutions, targeting sectors such as healthcare, finance, legal services, and education. This move reflects a strategic effort to enhance product-market fit, differentiate from horizontal platforms, and deliver more specialized value to enterprise customers.
India’s GenAI startup ecosystem is rapidly diversifying across sectors, with several standout ventures gaining traction. In the legaltech space, Spotdraft has raised approximately 86 million dollars from investors like Peak XV and Prosus Ventures for its AI-powered contract lifecycle management platform. Another rising player, Jhana.ai, is building an AI-driven legal research and drafting tool tailored for Indian lawyers, supported by Together Fund and JioGenNext with 1.6 million dollars in funding. In healthtech, Qure AI leads the pack with 125.2 million dollars raised from Lightspeed and Novo Holdings for its AI-enabled interpretation of medical images such as X-rays and CT scans.
The Government of India has started the IndiaAI Mission with a total budget of INR 10,372 crore, which is about 1.2 billion dollars. This money will be used over five years to help grow the AI ecosystem in the country. The mission focuses on solving the big challenges faced by startups, researchers, and developers working in AI.
1. IndiaAI Compute Capacity
This part of the mission is building powerful AI computing systems with help from private companies. So far, 34,333 GPUs have been made available. This number is much higher than the original goal of 10,000. These GPUs are now being given at low prices to startups, researchers, and universities. This will make it easier for them to do high-level AI work.
2. IndiaAI Startup Financing
A special fund of INR 2,000 crore is being used to give financial help to AI startups. This is mainly for deep-tech startups that usually find it hard to get money from normal investors.
3. IndiaAI Foundational Models
This part supports the building of large language and multimodal AI models that are trained on Indian data and made for Indian needs.
4. GPU for Equity
The government is also starting a new idea called GPU for equity. In this plan, the government will give GPUs to selected startups in exchange for a small ownership share, usually between two to four percent. Some of the first startups chosen for this are Sarvam AI, Soket AI, Gnani AI, and Gan AI. Sarvam AI, for example, is getting help to build AI models made specially for India.
India’s GenAI sector faces two big risks: losing sector-specific AI markets to foreign players and leaving out millions without strong Indian language AI tools. To counter this, the government should create safe testing spaces, set clear secure data-sharing rules, and be an early adopter of Indian GenAI products. Expanding the Bhashini mission, improving AI for low-cost devices, and partnering with telecom firms can boost reach and preserve cultural diversity.
The sector also struggles with a shortage of skilled talent and costly compute power.
Limited expertise delays projects, drives up costs, and risks brain drain, while dependence on expensive foreign cloud services threatens AI sovereignty. Solutions include stronger industry–academia ties, national AI challenges, updated AI education, a national AI compute grid, equity-for-compute investment models, and incentives for private GPU data centers.
[Credits for header image: Deccan Chronicles
This content is for informational purposes only and does not constitute legal, financial, or investment advice. This has been constituted based on third-party sources. We do not assume any liability for actions taken based on this information.]
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