Achieving Liftoff A Perspective on the Growth of the Indian Space Industry The liberalisation in the investment thresholds and the PPP projects undertaken with ISRO have resulted in a steady rise of private sector participation, which in turn has benefitted conglomerates looking to invest, as well as given much needed ground level expertise to the various SMEs operating in...
Achieving Liftoff A Perspective on the Growth of the Indian Space Industry
The liberalisation in the investment thresholds and the PPP projects undertaken with ISRO have resulted in a steady rise of private sector participation, which in turn has benefitted conglomerates looking to invest, as well as given much needed ground level expertise to the various SMEs operating in the industry.
India’s contribution to the global space economy is predicted to be boosted by more than 10% by the year 2030, from a current global contribution of merely 2 – 3%, and has the potential to develop into a USD 40-100 Billion space industry by 2040. As reported by Invest India, India has launched 381 foreign satellites for 34 countries, on a commercial basis, between 1999 and 2022 with a cumulative revenue of USD 279 Million for the Indian Space Research Organisation (ISRO).
Currently, there are more than 400 firms, conglomerates and Small-Medium Enterprises (SMEs) alike, already contributing towards the growth of India’s space sector under the leadership of ISRO. In a year that has already seen the prodigious feats accomplished by the Chandrayaan-3 mission, the Indian space industry is set to be further augmented by the USD 125 Billion budget earmarked by the Indian government for the Department of Space (DOS) in the Union Budget for FY 2023-24.
Analysing FDI in the Space Sector
Until May 2015, Foreign Direct Investment (FDI) in establishment and operation of satellites was permitted up to 74% under the government route. Subsequently, the Government of India vide press note 12 dated 14 November 2015, which was retrospectively effective from 12 May 2015, amended the consolidated FDI policy to permit foreign investment in establishment and operation of satellites up to 100% under the government route, subject to the sectoral guidelines issued by the DOS/ ISRO. The status quo has been maintained ever since and even in 2023, the FDI Policy remains unchanged vis-à-vis FDI in the Indian space sector.
Recently, ISRO has started adopting Public Private Partnership (PPP) policies to encourage companies to take up more production activities rather than being part/ component manufacturers. The liberalisation in the investment thresholds and the PPP projects undertaken with ISRO have resulted in a steady rise of private sector participation, which in turn has benefitted conglomerates looking to invest, as well as given much needed ground level expertise to the various SMEs operating in the industry.
In a 2022 report, EY had predicted that the manufacturing sector within the Indian space economy would emerge as the second most rapidly expanding segment by 2025 on account of the increasing involvement of private entities in the space industry. The Indian space technology sector had received USD 28 Million in investments in the year 2020 which has risen exponentially to USD 112 Million in 2022. In the first half of 2023, startups operating in the space industry had already received USD 62 Million in funding, as reported by research firm Tracxn.
In recent years, there has been a steady and significant growth in the number of start-ups in the space sector, with private investments also rising by nearly 300%, as evidenced by (i) the USD 36 Million investment by Google in Bengaluru based start-up Pixxel, (ii) a substantial funding of USD 51 Million secured by Skyroot Aerospace, a manufacturer of launch vehicles, with Singapore’s GIC taking the lead in the funding round, (iii) the partnership between Bharti Global, an Indian telecommunications conglomerate, and One Web, a UK-based satellite communications company, to invest in and launch a global satellite internet constellation, which aims to provide internet access to remote and underserved regions around the world, and (iv) a fund raise of USD 20 Million by space-tech startup Agnikul, incubated at IIT Madras, from a venture capital firm and an existing investor, Rocketship.
Government Initiatives – staying ahead of the curve
India’s space sector is in the midst of evolving norms and regulations targeted at boosting the space economy in the country. The government has been actively taking initiatives to enable the commercialisation of the space sector in the country and induce private investments in the domain, with the aim of increasing the country’s share in the global space market.
Earlier this year, ISRO released the Indian Space Policy 2023 (Space Policy), which encompasses various reforms announced by the government for facilitating a level-playing field by aiding participation of non-governmental entities in the industry. With the vision to enable, encourage and develop a flourishing commercial presence in space, the Space Policy seems to finally embrace the vital role played by the private sector in the overall value chain of India’s space economy.
In a significant departure from the erstwhile policy, which focused on ISRO’s role as the sole agency for space activities in the country, the Space Policy elucidates the roles played by the DOS, ISRO, the Indian National Space Promotion and Authorisation Centre (IN-SPACe) set up in 2020, and the New Space India Limited (NSIL, the commercial arm of ISRO). According to the Space Policy, ISRO’s focus will now shift towards cutting-edge R&D and long-term projects such as the Chandrayaan and Gaganyaan missions, whereas NSIL will now become the interface for interacting with the industry, undertaking commercial negotiations and providing hand-holding support to ensure smooth and efficient transfer of technologies.
The DOS shall be at the helm of ensuring implementation of the Space Policy, with it also being responsible for interpreting and clarifying any ambiguities and ensuring continuous earth observation capability and data for national requirements. Additionally, IN-SPACe will be the autonomous government organisation acting as the single-window agency for authorising space activities, along with overseeing and guiding such activities in the Indian space industry.
Furthermore, the recently released Draft National Deep Tech Startup Policy 2023 (NDTSP), which has a significant focus on promoting deep tech startups in the space sector, further encourages private participation in end-to-end space activities. In essence, the NDTSP recognizes the potential of advanced technologies in transforming the space sector and aims to create a conducive ecosystem for such innovations to thrive.
Conclusion
The regulatory clarity vis-à-vis the roles and responsibilities of the various departments/ agencies, coupled with the flexibility provided by a case-to-case basis evaluation of proposed space activities by IN-SPACe, provides much needed encouragement to private players seeking avenues of contributing to the growth of the Indian space economy. With continuous regulatory headway and the spotlight shining brightly on the Indian space industry on account of the indubitable success of Chandrayaan-3, India is fast emerging as the favoured destination for foreign investments in the space industry.
Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.