While global Generative AI (GenAI) funding experienced a significant decline in the second quarter of fiscal year 2025, India’s GenAI sector bucked the trend, showing robust growth fueled by a surge in investments for business-to-business applications and Agentic AI startups.

GenAI startup funding in India reached $51 million in the second quarter, a six-fold increase when compared to the funding in the previous quarter.

This surge is primarily attributed to a wave of investments in startups developing practical B2B solutions, particularly in areas like enterprise workflow automation, conversational analytics, and digital content creation.

Funding rounds also have gone up significantly, with the quarter registering 20 rounds of funding after two slow quarters. 

There is a clear shift from foundational model development to application-focused innovation in India. Investors are recognising the potential of GenAI to transform businesses and are backing startups that are delivering tangible value through industry-specific solutions, the report said.

“The third and fourth quarters of 2023-24 saw Sarvam.ai and Krutrim funding of over $40 million each, while the funding revival in the second quarter of 2024-25 was led by applications and services,” a Nasscom report said.

Over 90 per cent of GenAI funding the quarter went to three startups – Nutrix AI, Dashtoon and Mihup. 

The number of funding rounds saw over three-fold increase in the quarter to 20 from six in the previous quarter and highest in the last four quarters. Interestingly, bulk of the rounds (77 per cent) happened in the early-stage startups.

Focus shifts to apps from LLMs

There seems to be a significant change in global Generative AI funding trends. Global GenAI startup funding has witnessed a sharp quarter-on-quarter decline in the second quarter of the financial year 2024-25, settling at around $4 billion. The funding dropped by 2.3 times over the funding in the first quarter. 

Despite the decrease in overall funding, the second quarter witnessed a surge in the number of funding rounds, hitting a record high of 206. This rise can be attributed to a shift in investment focus towards application-related activities, as indicated by the fact that most funding went to companies that were not developing LLMs. 

This trend could indicate a maturing GenAI market, with a growing emphasis on translating foundational models into practical, industry-specific solutions.

Arrival of Agentic AI

Nasscom found a sharp surge in the funding into Agentic AI. Since 2023, this space attracted funding of $1.3 billion across 53 deals, signalling the growing interest in this niche area.

Established tech giants like Amazon, Microsoft, Google, and Oracle are actively integrating AI agent code into their enterprise product offerings.

Agentic AI is like a really smart computer program that can do things on its own, almost like a personal assistant but much more powerful. It can make decisions, solve problems, and even take actions in the real world, all without needing a human to tell it exactly what to do. frameworks and their potential in automating complex business processes,” the Nasscom report said.

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