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India’s burgeoning space economy will get a significant boost with the establishment of a Rs 1,000 crore venture capital fund, which is expected to propel its growth by a staggering five times over the next decade. The fund, announced by Finance Minister Nirmala Sitharaman on July 23, 2024 in her Union Budget 2024-25 speech, could be a gamechanger for startups and small businesses in the industry.
Space economy includes all public and private actors involved in developing, providing and using space-related products and services — from research and development, the manufacture and use of space infrastructure like ground stations, launch vehicles, and satellites — to space-enabled applications such as navigation equipment, satellite phones, meteorological services. It also includes scientific knowledge generated by such activities, according to the Organization for Economic Cooperation and Development (OECD)
In 2020, the government introduced reforms in the space sector to enable and facilitate the participation of private players. On June 20, 2024, Jitendra Singh, Union Minister of State (Independent Charge) for Science and Technology, noted that the number of space startups in India skyrocketed to nearly 200 in 2024 from just one in 2022. He attributed this growth to the reform of the space sector.
“The new move [Rs 1,000 crore venture fund] is a welcome step. The government should have announced the venture capital fund when the space reform was introduced,” Vinay Kumar Dadhwal, Indira Gandhi chair professor for environmental sciences at the Bengaluru-based National Institute of Advanced Studies, told Down To Earth (DTE).
He added that in the initial stages, even large-sized space companies cannot generate enough funds and capital. Governments, he added, will have to support a few companies to establish themselves in various niche areas. “Since India has only a few established space companies, venture capital funding is needed,” he stressed.
Sunil Mani, honorary visiting professor at the Centre for Development Studies, also agreed that venture capital funding is the right mode of financing for private players. Such funds, he added, do not look for collateral. “They take risks based on an idea and its potential,” the expert told DTE.
The new allocation has raised the question of who will operate the venture capital fund. Dadhwal thinks that the government will grant money based on proposals and technical evaluations. Mani is unsure whether the government will run it, as there is no clarity yet.
India’s space economy stands at $8 billion, contributing to around 2-3 per cent of the global space economy. The government expects it to reach $100 billion by 2040.
If we consider the current figure, India’s space economy would be worth $40 billion over the next decade. “This is achievable provided the government increases the budgetary allocation for space,” Mani explained.
The government’s allocation for the Department of Space was Rs 13,042.75 crores for 2024-2025, an increase of Rs 498.84 crores for 2023-2024. The revised budget estimate for last year was Rs 11,070.07 crore.
According to a 2023 study published in journal Space Policy, government budgets were reduced as a percentage of gross domestic product (GDP) to around 0.05 per cent in 2011-12 and have remained there until 2020-2021, the study’s final period.
The Indian Space Research Organisation (ISRO) will be the primary buyer in the market. Companies can only expand if ISRO is their customer. Mani noted that this will be determined by the space budget.
According to Dadhwal, the impact of this move on the space economy will be determined by a variety of factors. These include where the money is made available, who gets it, and how easily and faster it can scale up. “That time will tell,” he said.
There are also other questions on whether the venture capital funding is annual or just a first transfer — these details are not clear either.
A private player in the space industry, meanwhile, pointed out that the sum may seem monumental but doesn’t meet global standards.
“In United States dollars, it [the total budgetary allocation] translates into roughly $120 million. That’s how much an upstream space startup wanting to build and launch cutting-edge space hardware needs to raise for their Series-A round,” pointed out Susmita Mohanty, entrepreneur and Director General of think tank Spaceport SARABHAI.
The sum is measly by global standards and expecting a thriving space economy within the next decade with these allocations is difficult, she said. For comparison, Japan recently launched a Space Strategy Fund valued at more than US$6 billion over the next 10 years to encourage space business-related research and development, Mohanty added.
More than 300 Indian entities have sent 440 applications to the Indian National Space Promotion and Authorisation Centre (IN-SPACe) for assistance in the space sector as of January 2024, according to the 2023-2024 Economic Survey.
IN-SPACe is an autonomous agency in the Department of Space (DOS), which was formed following the space sector reforms in 2020 to enable and facilitate the participation of private players.
Applications from Indian firms sought authorisation, handholding, facility support and consultancy, technology transfer, and facility usage in the space sector from IN-SPACe.
As of January 1, 2024, various non-governmental entities have signed as many as 51 memorandums of understanding (MoUs) and 34 joint project implementation plans to assist them in carrying out space activities.
In 2022, Hyderabad-based Skyroot Aerospace Private Limited became the first Indian private player to launch its rocket Vikram-S, a suborbital launch vehicle.
In 2024, Chennai-based Agnikul Cosmos Private Limited launched the world’s first rocket with a fully 3D printed engine rocket from the country’s first private launch pad called ‘Dhanush’ established by the company in Sriharikota.
