5 Emerging Sectors Primed for Venture Capital Interest in India As traditional sectors saturate, VCs look to turn their focus on emerging industries that are poised to define the country's next phase of surge. Here are five sectors that are likely to attract the most interest from VCs in India over the next few years.
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India's startup ecosystem continues attracting significant attention from venture capital (VC) investors, driving the country's economic growth, innovation, and massive potential in digital adoption.
According to GlobalData, startups in India secured a total of USD 9.2 billion in VC funding from 984 deals between January and October 2024, achieving a 44.4 per cent increase from 2023. According to data from McKinsey & Company, the Indian startup ecosystem contributed 10-15 per cent to the country's gross domestic product (GDP) growth between FY16 and FY23.
A recent report by Goldman Sachs also said that the Indian economy will stay relatively insulated against global shocks expected in 2025 and that its GDP growth will remain strong over the long term. The country's economy is set to grow at an average of 6.5 per cent in the next 5 years, said the report.
"The structural long-term growth story for India remains intact driven by favorable demographics and stable governance," said Santanu Sengupta, Chief India Economist at Goldman Sachs Research.
As traditional sectors saturate, VCs look to turn their focus on emerging industries that are poised to define the country's next phase of surge. Here are five sectors that are likely to attract the most interest from VCs in India over the next few years:
Climatetech and Sustainability
Fueled by India's ambitious sustainability goals, Climatetech has emerged as one of the most promising sectors over the last few years. Government initiatives such as the National Electric Mobility Mission and Production-Linked Incentive (PLI) schemes are encouraging innovation and investments, intending to achieve net zero in carbon emissions by 2070.
According to the India Brand Equity Foundation (IBEF) data, the renewable energy market alone in India is expected to reach USD 250 billion by 2030.
VC firms that especially focus on climate and sustainability-focused investments have also invested heavily in climate-friendly mobility startups like BluSmart, which attracted USD 49 million in 2024.
Ankur Bansal, Managing Director of Blacksoil, said "India's 2025 investment hotspots are DeepTech and Climate Tech, both are poised for significant growth. With supportive policies in place, Climate Tech is set to accelerate, particularly in clean-tech adoption." Blacksoil is part of the 2023 funding round for BluSmart.
Healthtech and Medtech
The Healthtech sector in India has seen exponential growth in recent years, accelerated by the pandemic and the country's huge demand for scalable health solutions, given the market size. Remote consultation, wearables, artificial intelligence (AI) enabled diagnostics and digital health platforms are driving the sector.
The government's Ayushman Bharat Digital Mission (ABDM) is paving the foundation for digital healthcare, with the total market size expected to reach USD 50 billion by 2033, according to RedSeer.
Startups such as HealthifyMe and Even Healthcare raised USD 20 million and USD 30 million respectively in 2024, with health-focused VCs such as Khosla Ventures featuring in both the funding rounds.
Agritech and Foodtech
India still remains predominantly an agrarian country, with agriculture providing 40 per cent of the total employment in India. Startups have leveraged the market size so far by using technology to enhance productivity, supply-chain efficiency, and food safety.
Increased technology adoption and internet penetration in rural areas combined with government initiatives such as the Agri Infra Fund are helping fuel growth. The Indian agritech market is expected to reach USD 24 billion by 2025, according to data by Bain and Company.
In 2024, Arya.ag, an agritech startup focusing on post-harvest services, secured USD 29 million in funding from Blue Earth Capital, suggesting a continued funding spree to follow the next year.
Fintech 2.0
Fintech in India has been a VC favorite for a few years, and the emergence of 'Fintech 2.0' has certainly pushed the sector well into the future with startups now focusing on embedded finance, open banking, wealth management, and financial inclusion.
The Unified Payments Interface (UPI) revolution has been the primary driver for India's digital infrastructure providing a solid foundation for innovation in financial services in terms of fund transfers and credit availability.
India's Fintech market is expected to reach USD 200 billion in revenue by 2030, according to Boston Consulting Group (BCG). One of the biggest deals in the Fintech space recently was secured by Svatantra Microfin, raising USD 240 million in the first half of 2024. Other examples like Zerodha, Razorpay, and Jupiter have attracted substantial VC interest in the past, indicating the trend to continue into 2025.
Deeptech and AI
Deeptech, which encompasses advanced technologies like AI, machine learning, robotics, and quantum computing has gained significant traction all over the world, with the startup ecosystem in India leveraging these technologies to serve varied sectors.
India's AI market potential is expected to reach USD 7.8 billion by 2025 according to a study by Nasscom, indicating a massive potential within the country for the use of Deeptech in sectors such as health, space, agriculture, and even finance.
Government-backed programs like the National AI Strategy and the influx of investments in semiconductor manufacturing are encouraging growth. Eruditus, an Edtech company recently secured USD 150 million in Series F funding while Whatfix, a digital adoption provider secured USD 125 million in Series E funding led by Warburg Pincus, suggesting strong interest in AI-powered solutions in India.
"Deeptech, driven by AI and advanced technologies, continues to revolutionize industries globally. Despite a recent slowdown in funding, we expect investment in Deeptech to pick up. Additionally, as market opportunities are rapidly expanding in these two sectors, scaling is becoming increasingly feasible," said Bansal of Blacksoil.
With strong government support, increasing digital adoption, and robust innovation, India is well-positioned to attract billions of dollars in VC funding across these sectors in the coming years.
The country's startup ecosystem is rapidly evolving, with emerging sectors poised to dominate the interest for VC investments. These sectors are not only addressing some of India's most pressing issues but are also offering growth opportunities for investors. With strong government support, increasing digital adoption, and robust innovation, India is well-positioned to attract billions of dollars in VC funding across these sectors in the coming years.
