Karnataka Clears ₹60,000 Crore Aerospace Policy, Opens Government Doors to Bengaluru Startups

The Karnataka Cabinet has approved a new Aerospace Policy 2026-2031 targeting ₹60,000 crore in investment over five years, alongside a separate decision that allows eligible startups to pitch technology solutions directly to state government departments. Both decisions were taken at a cabinet meeting held in Bengaluru on 9-10 September 2026, days before Chief Minister D K Shivakumar completed 100 days in office.

Deputy Chief Minister G Parameshwara, who briefed reporters after the meeting, said the amended startup policy would let the government test and adopt solutions to administrative and social challenges before they are proven in the private market. "Instead of waiting for technologies to be tested and proven by the private sector, we have decided to allow startups to come to the government first to make a pitch," he said.

Startups Get a Direct Line to Government Departments

Under the revised policy, startups will be able to present solutions worth up to ₹25 lakh directly to state government departments, without going through a conventional tendering process first. IT-BT and Home Minister Priyank Kharge said safeguards would be built in to ensure participating companies are credible startups will need to come through government-backed programmes such as ELEVATE, or demonstrate an established funding track record, before they are allowed to pitch.

For Bengaluru, which houses the bulk of Karnataka's registered startups, this is a meaningful shift. Government departments are often difficult markets for early-stage companies to break into, given lengthy procurement cycles. A direct pitch route even capped at ₹25 lakh per solution gives Bengaluru-based founders a faster, lower-friction way to prove their technology inside a real government use case, which can in turn help them win larger contracts or attract private investors later.

Aerospace Policy Targets ₹60,000 Crore and 60,000 Jobs

The cabinet also cleared the Aerospace Policy 2026-2031, which aims to attract ₹60,000 crore in investment into Karnataka's aerospace and defence manufacturing sector over the next five years. The policy offers subsidies of up to 30 percent for investments in designated focus zones, and up to 25 percent for non-focus zones, with the state divided into different incentive zones for this purpose. Parameshwara said the policy is expected to support at least 50,000 jobs, and pointed to Tata Advanced Systems' planned aircraft manufacturing project, undertaken in partnership with Hindustan Aeronautics Limited, as an example of the kind of large-scale project that could benefit from the new incentives.

Karnataka already anchors a significant share of India's aerospace and defence manufacturing base, with Bengaluru at its centre the city is home to established players such as Hindustan Aeronautics Limited and a dense cluster of small and medium aerospace component manufacturers. A fresh policy aimed at attracting large anchor investments is likely to have knock-on benefits for this existing supplier ecosystem, many of which operate as MSMEs supplying precision components to larger manufacturers.

Alongside the aerospace policy, the cabinet approved a ₹300 crore "Udyoga Nidhi" employment fund aimed at encouraging formal employment in 10 less-developed districts Yadgir, Bidar, Koppal, Raichur, Kalaburagi, Vijayapura, Belagavi, Vijayanagara, Haveri and Gadag under which eligible industries will receive up to ₹2,500 per employee annually for two years, linked to provident fund contributions. A separate Textile and Readymade Garments Policy 2026-31 was also cleared, targeting ₹20,000 crore in investment and identifying 33 taluks for textile and garment-sector development.

Part of a Broader Push on Startups and Manufacturing

These cabinet decisions arrive in the same week that the Ministry of MSME inaugurated a ₹156 crore Technology Centre in Devanahalli, Bengaluru, aimed at giving small manufacturers access to advanced electronics manufacturing equipment. Taken together, the two developments point to a coordinated push from both the state and central governments to strengthen Bengaluru and Karnataka's position in advanced manufacturing, alongside the software and services sectors the region is best known for.

For Bengaluru's startup community, the new government-pitch route adds one more channel to an already active funding and support ecosystem in the city. Entrepreneurs exploring how to register and set up a company in the city can find practical starting points in this guide to starting a business in Bangalore, while manufacturers and component suppliers looking to grow their local visibility can list themselves on Bengaluru Connect's business directory.

What Comes Next

The state government has not yet released detailed implementation guidelines, eligibility criteria, or department-level timelines for the startup pitch policy. Similarly, the Aerospace Policy's ₹60,000 crore investment target and 50,000-job estimate are five-year projections tied to the policy period, not figures that have already been achieved Karnataka has announced aerospace investment and job targets in earlier policy cycles (2013 and 2022) that were only partially realised, so the coming months will be important in showing how quickly the new incentives translate into signed projects on the ground.

Source: Urban Acres; additional reporting from The Peoples Board