The Union Cabinet has approved Startup India Fund of Funds 2.0 the Rs 1 lakh crore urban fund, and also cleared the Rs 10, 000 crore Startup India Fund, with a boost of up to 5 years, with a special Rs 4 lakh crore investment in urban centres. It is important as it will drive inclusive urban renewals, innovation, and secure sustainable citizen-oriented growth within fast-growing urban India.
|
Key highlights
- Infrastructure Reinvention of Urban Areas
- Startup Ecosystem and Innovation in India
- Governance and Finance Models in Urban Transformation
- PPP in Urban Development
- Social and Environmental Aspects
|
The Union Cabinet approved two major ₹1 lakh crore (around $12 billion) Startup India Fund of Funds 2.0, which in 2025–26 are set to drive economic growth by promoting innovation and strengthening urban infrastructure. The recent policy declarations by India are an indicator of a revolutionary age in urbanisation and innovativeness. The government support through movements of the urban fund of Rs 1-lakh crore, the incentive of startup fund of Rs 10,000 crore and the expected investment of 4 lakh crore in cities over the next five years is a multidimensional plan that will help to improve constructive infrastructure, promote starting ventures, and make growth inclusive. These measures are not just financial promises but a complete foresight of long-term urbanisation, technological advancement and social justice. Through economic vibrancy and citizen-based planning, the initiatives aim to make Indian cities the driver of resilience, competitiveness and globalisation.
Infrastructure Reinvention of Urban Areas
The urban infrastructure transformation in India is also in a decisive phase, with the government coming up with an Urban Challenge Fund of Rs 1 lakh crore projected to realise a jump of Rs 4 lakh crore of investment in a period of five years. This transformation shifts urban development from reactive, fragmented planning to a proactive, technology-enabled, and sustainable approach aimed at building more resilient and livable cities. Major initiatives such as the Smart Cities Mission, AMRUT 2.0, and PM Gati Shakti are driving modernization in transportation, housing, and essential infrastructure networks. Here are Key Pillars of Urban Infrastructure Reinvention of urban areas in India-
Connectivity and Smart Cities
Urban Challenge Fund (UCF) focuses on market-led funding to develop metro systems, improve road networks and rail accessibility, and unify digital infrastructure. It is a reform-driven model, the opposite of grant-based; instead of providing a grant, it is based on reforms and solution-focused efforts. The scheme will encourage private participation by paying 25 percent of the project costs via the central assistance, thereby making it sustainable.
Inclusivity and Affordable Housing in Indian Cities
Urban transformation is not only seen through physical infrastructure, but it goes further to focus on equitable access. The initiative includes affordable housing, slum redevelopment and inclusive planning. As the population of cities is projected to serve around 50 percent of the Indian population by 2036, notwithstanding the socio-economic inequalities, inclusive housing policies are the key to addressing the socio-economic disparities and supporting high-quality living.
Startup Ecosystem and Innovation in India
The startup ecosystem in India is developing a new growth trajectory, and the government has sanctioned 10,000 crore rupee Startup India Fund of Funds 2.0 to boost innovation, deep-tech research, and entrepreneurship in the country.
Funding and Policy Support to Indian Startups
The Fund of Funds 2.0, which was announced in February 2026, aims to bring together long-term domestic funds and expand the venture-capital environment. The scheme assesses the severe lack of financing that often inhibits entrepreneurial development, with a focus on the innovative manufacturing companies and start-ups in the early stages of their development. This corpus should act as a catalyst for private investment and the expansion of venture capital to areas beyond large metropolitan centres, and in this manner, small cities and regions will get democratised in the provision of opportunities.
Impact on Different Startups
The plan focuses on deep-tech, climate-tech, health-tech and fintech startups, which is an expansion of the overall goals of India in terms of development. Based on government statistics, the first Fund of Funds initiated in 2016 assisted in excess of 80 venture-capital firms and indirectly funded well beyond 700 startups. Taking this base, the new Rs 10,000 crore funds will be aimed at boosting innovation-based entrepreneurship, strengthening the manufacturing competitiveness and greatly promoting the creation of job opportunities in various sectors.
Inclusive Innovation through Startups
In addition to funding, the project focuses on inclusivity through empowering the youth, women entrepreneurs and the marginalised groups. Combining social equity with the innovation of technology, the scheme considers the start-ups as the source of economic dynamism as well as social transformation, so that the innovation can be used to guarantee national development as a whole.
Governance and Finance Models in Urban Transformation
City redesign requires excellent finances and management systems. The change of India to reform-based, accountable and participatory models is reflected in the Rs 1 lakh crore Urban Challenge Fund and Rs 4 lakh crore city investments.
PPP in Urban Development
The government has focused on PPPs as one of the pillars of urban funding. As per the Ministry of Housing and Urban Affairs, PPPs have already financed almost a quarter of Smart City Mission projects to allow the inclusion of private capital alongside public capital. This combined financing reduces the burden on the budgets and, at the same time, maintains efficiency and innovativeness in the implementation of the projects.
Transparent Urban Governance
One of the main pillars of the new urban agenda is governance reforms. Urban Challenge Fund mandates digital monitoring, citizen participation, and analysis to assess the outcomes. According to research by NITI Aayog (2025), cities which have a participatory type of governance achieve 20-30 percent improved efficiency in service delivery, in contrast to the traditional bureaucratic systems. The use of transparency, among others, such as online dashboards, is aimed at reducing leakages and ensuring accountability.
Fiscal Sustainability in Cities
Long-term sustainability is also the priority of the financing model. The scheme encourages states and municipalities to raise more funds by financing 25% of the project costs with the help of the central assistance. This will be a fiscal discipline strategy aiming to promote innovative financial tools, including municipal bonds, which already rose more than Rs 4500 crore in Indian cities.
Environmental and Social Aspects in Urban India
Rapid urban development in India is not only related to infrastructure and finance, but it also focuses on societal inclusion and environmental sustainability so that cities transform into equitable and climate-responsive spaces.
Social Equity and Inclusivity in Urban India
The urban agenda of the government incorporates the marginalised communities, women, and youth in the planning. The Ministry of Housing and Urban Affairs (2025) further stated that the inclusive housing model and participatory governance patterns have enhanced easy access to basic services by almost 12 million urban poor through initiatives like PMAY- Urban. These measures make the growth benefits be distributed fairly among the various social classes.
India’s Urban Environmental Sustainability
The urban investments are in line with India's climate commitment. According to a study conducted by TERI, Indian cities are responsible for close to 70 percent of the total greenhouse-gas emission in the country, and the need to implement sustainable planning is apparent. Green buildings, renewable-energy integration initiatives, and solid-waste management have been given importance as they work towards minimising the carbon footprints and making them resilient to the impact of climate risks.
Climate Readiness and Future Readiness in Citie
The Rs 1 lakh crores Urban Challenge Fund has included climate-sensitive design, which aims at flood management, energy-efficient transport and conservation of biodiversity. India is committed to protecting urban populations from extreme weather events through the integration of resilience in the city planning process, and at the same time advancing its Sustainable Development Goals (SDGs).
Conclusion
The approval of Rs 1 lakh crore urban funds, Rs 10,000 crore boost for startups and Rs 4 lakh crore of investments in cities is representative of an overall strategy covering the future of India. These initiatives combine the elements of an integrative infrastructure development, entrepreneurial innovation, clear financing, and social-environmental priorities, which can be interpreted as an overview of sustainable urbanisation. Together with them, the Indian cities are branded as the drivers of inclusive growth, resilience, and global competitiveness, through which modernisation is geared towards equity and long-term sustainability.