India's R&D financing is shifting from grants to patient capital. Examine the design of the RDI Scheme and its potential to bridge the TRL 'valley of death' for deep-tech startups.

The 'valley of death' is the funding gap between a lab prototype and a flight- or market-qualified product. Grants rarely reach this stage, and private venture capital avoids its long timelines. The ₹1 lakh crore Research Development and Innovation (RDI) Scheme, approved in July 2025, targets this gap with patient capital instead of grants [1].

Design of the RDI Scheme

• Two-tier structure: a Special Purpose Fund within ANRF acts as custodian. It channels money to Second-Level Fund Managers such as TDB and BIRAC, which select projects and assess risk [1][2].
• Instruments, not grants: long-tenor, low- or nil-interest loans and equity for startups; no grants [1].
• Risk-sharing: funds TRL-4 and above, caps support at 50% of project cost, and is collateral-free [3].

Potential to bridge the valley of death

• Targets the right stage: TDB's ₹116 crore optionally convertible debt to Manastu Space takes a hydrogen-peroxide green propulsion system from TRL-6 to TRL-9 [4].
• Fits deep-tech gestation: Agnikul Cosmos received ₹200 crore to develop a reusable launch vehicle up to TRL-8 [5].
• Builds on public demonstrations: Manastu's thruster had already flown on ISRO's POEM-4 [6]. The RDI money funds the step from demonstration to operational qualification.
• Recyclable capital: loan repayments or equity gains can be lent again. Grant money is spent once.

Limitations

• Disbursal lag: TDB has approved ₹2,192 crore of support but had received only ₹500 crore by March 2026 [2]. Tranches could stall in the middle of a project.
• Unsecured exposure: if a startup fails, the state has little to recover.
• Market risk: TRL-9 requires flights on real missions. Without anchor buyers, qualified products stay on the shelf.
• Few managers: only two fund managers are active so far, so pipelines are concentrated [2].

The RDI Scheme moves India's R&D financing from spending to investing, and it is aimed squarely at the valley of death. To work, it needs predictable releases, public milestone reporting, more fund managers, and government procurement as a first customer (for example ISRO missions). With these, it can advance Atmanirbhar Bharat and SDG-9 on innovation-led industrialisation.