Unlocking domestic capital

India is poised to become the world’s third-largest economy by 2030, with its GDP projected to grow from $3.9 trillion to $6.6 trillion. Private markets, particularly alternative investment funds (AIFs), will play a vital role in facilitating this growth. 

As of March 2025, AIFs have become an integral part of India’s managed product mix, with total commitments reaching Rs 13.49 lakh crore and growing at a compound annual growth rate (CAGR) of 31.5% from FY21 to FY25. There are currently over 1,600 AIFs registered. 

The growth of AIFs is driven by investors seeking diversification, increased domestic investor participation, a supportive regulatory framework, and a vibrant start-up ecosystem. 

Domestic investors, including high-net-worth individuals (HNIs), family offices, private and public/ sovereign institutions, and funds of funds, contribute 52.7% of the capital in Category I and II funds. 

AIFs offer tailored strategies for long-term investors, including venture capital and private equity funds, as well as options for those seeking intermittent payouts through debt and real estate funds. 

Government-backed domestic institutions have collectively committed Rs 24,293 crore across SIDBI, SRI Fund, NIIF, EDF, NABARD, TDB and BIRAC programmes. These are strong signals of growing national confidence in private markets as a nation-building asset class. Research Development and Innovation Fund (RDIF), a flagship initiative under the Department of Science and Technology (DST), has been recently approved by Union Cabinet, that aims to catalyse private sector investment in R&D with a total outlay of Rs 1 lakh crore over six years.