Government Considers ₹15,000-20,000 Crore Fund To Build India’s Frontier AI Ecosystem

The government is considering an anchor investment of ₹15,000-20,000 crore for a proposed artificial intelligence (AI) fund under the IndiaAI Mission. The proposed National Frontier AI & Compute Fund (NFAICF) would provide long-term risk capital to India’s frontier AI companies and support graphics processing unit (GPU) clusters, specialised data centres and other AI infrastructure.

The fund is being considered as the cost of developing advanced AI models and computing infrastructure rises beyond the reach of existing Indian venture capital and grant-based funding. A study estimates that training large frontier models could cost more than $1 billion per run by 2027.

NFAICF Structure And Funding Model Under Discussion

The proposed NFAICF is still at the consultation stage, with its final size, structure, governance and government capital contribution yet to be decided. Discussions have included a potential 50:50 model involving private participation.

The proposed AI fund is intended to address the absence of a dedicated domestic equity vehicle for frontier AI. The existing IndiaAI Mission has a ₹10,372 crore outlay, which provides subsidised compute access and funding for indigenous foundation models.

A closed-door meeting in Delhi brought together AI startups, venture capital firms, infrastructure providers and government officials to examine potential financing structures. Discussions also considered whether institutions such as the International Finance Corporation could participate.

AI Compute Fund May Use Multiple Investment Routes

The proposed AI compute financing vehicle could be structured as a Securities and Exchange Board of India (SEBI)-regulated Category I Alternative Investment Fund. An investment committee comprising experts from technology, investment, infrastructure and finance is being considered.

The NFAICF could use venture and growth equity, convertible instruments, infrastructure equity, fund-of-funds commitments and direct co-investments, depending on the company or infrastructure project.

Its objectives would cover long-term funding for foundation-model developers, specialised AI systems and strategically important technologies. It would also finance GPU clusters and specialised data-centre capacity, while accounting for changing hardware, utilisation, power needs and demand visibility.

The government is also examining capacity commitments and pre-agreed commercial arrangements linked to actual demand from AI companies and research institutions. Such mechanisms could help limit the risk of underused infrastructure. A follow-on and co-investment facility is also under consideration for later funding rounds.

The final structure of the proposed frontier AI fund remains subject to stakeholder feedback and further assessment.

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