Context 

• • In order to become a developed country in 25 years, India will need to build world-class deep tech capabilities in certain sectors. This can be achieved by promoting deep-tech start-ups in the country.

• Deep tech can be described as innovations that have the potential to push technological boundaries beyond what is considered possible right now. This encompasses areas of fundamental sciences such as physics and chemistry but also touches such scientific and technological fields as robotics, AI and machine learning, biotechnology, health and longevity, and IoT.

Scenario in India

• India had over 3,000 deep-tech start-ups, dabbling in new-age technologies like Artificial Intelligence, Machine Learning, Internet of Things, Big Data, quantum computing, robotics, etc., at the end of 2021. 
• Bengaluru accounts for 25-30 per cent of India’s deep-tech start-ups, followed by Delhi-NCR (15-20 per cent) and Mumbai (10-12 per cent). Overall, the share of deep-tech start-ups in India’s overall entrepreneurial ecosystem stands at 12 per cent now.
• India’s deep-tech ecosystem has grown 53 per cent in the last decade, and is now at par with that in developed economies like the US, China, Israel, and Europe. 
• From drone delivery and cold chain management to climate action and clean energy, deep-tech start-ups are making their presence felt across sectors. 

Challenges

• However, despite impressive growth, deep-tech start-ups continue to grapple with challenges, including dearth of good talent, access to seed capital and go-to-market opportunities, missing research guidance, high costs of customer acquisition, and more.  

Crucial Role of Funding

• In the United States, Israel and North Atlantic Treaty Organization countries, the government is still the largest source of funds for Deep Tech.
• Billions of dollars of funding flow in through agencies such as the Defense Advanced Research Projects Agency, the Directorate of Defense Research and Development and the Defence and Security Accelerator, much of which becomes the oxygen that small businesses survive on.
• The Indian venture capital ecosystem is cautious when it comes to Deep Tech. Investors are not willing to invest their funds in Deep Tech because it takes much longer to mature.

Redirecting CSR and Tax Incentives

• Certain innovations in the existing corporate social responsibility (CSR) budgets and high net worth (HNI) tax breaks will incentivise capital flowing into strategic tech.

• Firstly, the CSR budgets. By some estimates, the annual CSR budget is ₹15,000 crore, of which a substantial portion goes unutilised. CSR has traditionally been utilised for the social sector. 
• However, this growing corpus should also be used for the development of strategic technology. Large corporations can be incentivised to use some of this budget to serve the strategic needs of the nation. 
• Secondly, High net-worth individuals (HNIs) can also be offered tax incentives to make equity investment in the same critical technology startups which would otherwise be frowned upon as high-risk investments. 
• To prevent a misuse of funds, it is important to create qualifying criteria. The pool of investable companies must be limited to Government of India-recognised start ups.

Way Forward

• India will remain a net importer of critical technology in the foreseeable future. 
• If correctly aligned with the programmes launched by the Government, CSR funds and the right tax incentives to HNIs can create an almost self-fulfilling prophecy in the nascent Indian Deep Tech ecosystem.