Union Cabinet has given approval for two major initiatives to boost urban development and the startup ecosystem. These include the Urban Challenge Fund with ₹1 lakh crore in central assistance and the Startup India Fund of Funds 2.0 with a corpus of ₹10,000 crore.
The Urban Challenge Fund aims to drive market-led transformation in cities. It will provide central assistance covering up to 25 per cent of project costs, provided at least 50 per cent of the funding comes from market sources. The scheme targets major industrial cities with populations over one lakh and focuses on creative redevelopment, better water and sanitation, and overall urban infrastructure. It will run from FY 2025-26 to FY 2030-31, with possible extension to FY 2033-34.
This fund builds on the announcement made in the Union Budget and seeks to turn cities into growth hubs. By encouraging private investment alongside government support, it is expected to unlock larger investments, reduce reliance on fully public funding, and promote sustainable urban projects.
Alongside this, the Cabinet cleared Startup India Fund of Funds 2.0 to strengthen venture capital flows. The ₹10,000 crore corpus will support deep-tech, tech-driven manufacturing, innovative startups, and early-growth stage companies. It follows the success of the first Fund of Funds, which backed over 1,370 startups through alternative investment funds.
The new fund focuses on filling high-risk capital gaps, expanding funding beyond major metros, and mobilising long-term domestic capital. It aims to create high-quality jobs, boost manufacturing, and position India as a stronger global innovation hub.
These approvals come as part of broader efforts to accelerate economic growth through infrastructure and entrepreneurship. They reflect the government’s commitment to balanced development in urban areas and support for young innovators.
The decisions were announced after the Cabinet’s meeting, with details shared by senior ministers. Implementation guidelines are expected soon to ensure smooth rollout.
