OPINION | Backing Indian ambition with capital for growth

Foreign venture and growth funds have shaped much of the India’s startup trajectory

Globalisation, once the default engine of growth, is losing momentum. The assumption that open markets, frictionless capital flows, and borderless technology would naturally yield shared prosperity no longer holds. Around the world, governments are recalibrating by turning inward, reassessing vulnerabilities, and rebuilding the foundations of domestic resilience.

India, too, enters this budget cycle at a moment that warrants a strategically calibrated approach for bolstering the internal growth drivers to ensure its macroeconomic checklist stays healthy.

India’s last decade has been defined by entrepreneurial, technological, and economic ambition. However, the capital underwriting this ambition has largely been external. Foreign venture and growth funds have shaped much of the country’s startup trajectory, yet the enduring value created on Indian soil has often accrued elsewhere.

This Budget offers a pivotal moment to check this course. By strengthening domestic pools of risk capital, India can ensure that the next wave of wealth that is generated is anchored firmly at home.

The case for Indian capital

There’s a strong case for it. This year has revealed a decisive shift in the balance of market power. On one side, Foreign Institutional Investors (FIIs) withdrew more than Rs 1.98 lakh crore from Indian equities, extending last year’s selling streak and underscoring how fragile foreign capital can be in the face of global uncertainty.

On the other, Domestic Institutional Investors (DIIs) deployed over Rs 6 lakh crore in Indian equities, the highest annual inflow since the BSE began tracking such data in 2007. In a milestone long in the making, DIIs even overtook FIIs in total equity holdings for the first time, signalling a structural reordering of market ownership.

DIIs kept India’s growth story fuelled even as the FIIs “taper tantrum” displayed how dependent their risk appetite is on currency movements, Fed tightening, geopolitical shocks, global trade uncertainties, market volatility etal. The DIIs acted as a steady counterweight, absorbing volatility and preventing deeper corrections. They showed clearly where India’s long-term tailwinds now reside.

The engines within

This shift in market dynamics is not accidental. It is the culmination of deep structural changes in how India saves and invests. Recently, Systematic Investment Plans (SIPs) alone drew over Rs 29,500 crore in monthly inflows, lifting SIP AUM to Rs 16.25 lakh crore. Alongside, the mutual fund industry reached another milestone as equity assets under custody (AUC) crossed Rs 50 lakh crore for the first time. Indian households today own nearly one-fifth of the nation’s Rs 440-lakh-crore equity market—an ownership share not seen in over two decades. When combined with mutual funds, individual investors now hold 18.75% of all listed equities, signalling a historic broadening of domestic participation.

This expanding reservoir of household savings, channelled through disciplined monthly flows, has quietly but fundamentally reshaped India’s financial architecture. Retail investors have become the backbone of domestic capital formation. Instead of lying idle in gold, real estate, or low-yield deposits, their savings are now powering DIIs with capital. This steady stream is enabling credit expansion, financing capex-heavy and infrastructure-led businesses, and fuelling the rise of tech-forward and digital-infrastructure enterprises. In effect, everyday investors are underwriting India’s next phase of growth.

Sustaining the Alpha

With this structural transition, India now has the capacity to fund its own future. Indian VCs and institutional investors are architects of India’s next phase of nation-building with the potential to build long-term national capacity by deploying risk capital, a critical infrastructure asset for a modern, aspirational economy.

Crucially, domestic investors can channel investment into the sectors that global capital often overlooks: deep-tech, early-stage science-led ventures, infrastructure-intensive models, and high-impact innovations that strengthen India’s economic foundations. Consider infrastructure – India will require an estimated $2.5 trillion in capital by 2030 to meet its urbanisation, decarbonisation, and economic development goals. Currently India invests only around 6.5% of its GDP annually on infrastructure, against the desired 10%. This gap presents a potential opportunity that can be plugged in by risk capital. To build such strategic capabilities at home, India must actively incentivise domestic and global LPs to route their capital through Indian venture platforms. Channelling foreign risk capital via domestic VCs ensures that long-term value creation remains anchored in India. It is an act of nation building. After all, failing to deploy risk capital effectively at home makes it vulnerable to migrate, taking with it talent, intellectual property, and future ownership. Backing Indian ambition with Indian capital, therefore, is about safeguarding India’s economic sovereignty while remaining open to global capital. That too on India’s terms.

Architecture of sustained growth

In a VUCA world, the rising influence of domestic investors in sustaining market depth and economic resilience is critical. India’s development trajectory will depend on how effectively capital formation translates into productivity, innovation, and long-term value creation. Achieving sustained real GDP growth of around 8% over the next decade will require raising the investment rate to nearly 35% of GDP. From a policy perspective, broadening access to savings vehicles, embedding equities into pension and retirement systems, expanding low-cost diversified products, can turn markets into engines of inclusive growth.

Strategic reforms that lower entry barriers, expand institutional reach, and mitigate income–equity risk correlation can further strengthen confidence in India’s capital markets while empowering households to build wealth over time.

Just as domestic mutual funds enjoy specific reservations in IPO allocations, a similar policy innovation could be explored for private markets—creating structured avenues or preferential windows for domestic family offices and HNIs to participate in homegrown venture funds.”

An ecosystem needs to be created that gives founders the confidence that their most ambitious ideas can be financed at home, without being constrained by global risk cycles or foreign capital retreat. India can then unlock a self-sustaining loop where domestic savings fuel domestic innovation, which in turn strengthens the nation’s economic resilience.

A forward-looking Budget that strengthens domestic capital formation will not only support economic resilience but also empower India’s households and innovators to fully participate in the nation’s growth story.

(Archana Jahagirdar, Founder and Managing Partner, Rukam Capital.)

Views are personal, and do not represent the stand of this publication.