Sky is not the limit: India’s ambitious drive in space tech

The Indian space tech industry is rapidly emerging as a dynamic sector, brimming with opportunities for investment and innovation. As global interest in space exploration and technology intensifies, India’s space economy is poised for significant growth, with projections indicating a market opportunity of over US$ 77 billion by 2030, growing at a remarkable CAGR of 26% from 2023-30. Although India currently accounts for 2-3% of the global space economy, there are ambitious plans to expand this share to over 10% by 2030, driven by both governmental initiatives and private sector participation.

In the recently announced Union Budget 2024-25, the Finance Minister Smt Nirmala Sitharaman announced a Rs 10 billion venture capital fund for investments into India’s space economy, projecting that it will grow by five times in the coming decade. In this article, India Business & Trade looks at the progress made by the sector and the promise it holds, particularly with the emergence of a vibrant startup ecosystem.

Space tech

Image source: Pixabay

The global space economy is expected to reach US$ 1.8 trillion by 2035 (accounting for inflation), up from US$ 630 billion in 2023, as per a report published by Mckinsey. The space economy is growing at a rate of 9% per year, faster than the global GDP.

Similarly, the Indian space tech sector is experiencing rapid growth, with projections indicating that the total market opportunity could reach over US$ 77 billion by 2030, growing at a CAGR of 26% from 2023-30, according to Inc42. Currently, India’s space industry accounts for 2-3% of the global space economy, but is expected to increase its share to more than 10% by 2030.

Space tech sector

Source: Inc42

India’s space sector holds vast potential, driven by both its achievements and future aspirations. As of 2024, India aims to expand its share of the global space economy, with an ambitious target to reach US$ 100 billion by 2040.

For decades, the Indian Space Research Organisation (ISRO) has been the driving force behind India’s impressive space initiatives. With its successful missions ranging from the 1975 launch to the 2014 Mars Orbiter Mission (MOM) and the most recent successful launch of Chandrayaan-3 in 2023, India has become a prominent player in the global space arena. In actuality, ISRO can claim credit for 124 spacecraft missions, 432 launches of foreign satellites, 98 launches, and a host of other accomplishments.

In the recently announced Union Budget 2024-25, the Finance Minister Smt Nirmala Sitharaman announced a Rs 10 billion venture capital fund for investments into India’s space economy, projecting that it will grow by five times in the coming decade.

A thriving startup ecosystem

India’s space programme achieved a historic milestone on May 29, 2024. The world’s first rocket with a single-piece 3D printed engine was successfully launched by Agnikul Cosmos, an Indian spacetech startup, on Wednesday at 7:15 a.m. from its own launchpad in Dhanush in Sriharikota. This was a huge turning point for the company as well as for the developing private space industry in India.

This historic launch kind of exemplifies how India’s space programme is completing the circle. From ISRO’s pioneering efforts in the 1960s to the thriving private sector of the 2000s, India has emerged as a global space exploration powerhouse.

Recognising the enormous opportunities in the Indian space market, Google made its first investment of US$ 36 million in Pixxel, a Bengaluru-based startup. According to news reports, Pixxel plans to launch six hyperspectral imagery satellites in 2024 using ISRO and SpaceX rockets.

These satellites will benefit a variety of industries, including agriculture, energy, forestry, and environmental monitoring. In April, Tata Advanced Systems Ltd. (TASL) successfully launched the country’s first military-grade geospatial satellite, built entirely by the private sector.

Key highlights of space sector

India’s space tech startup landscape

The privatisation of space has opened new avenues for startups and private enterprises. The emergence of numerous space-tech startups in India highlights the dynamism of the sector. Indian startups are making significant strides in various areas, including satellite manufacturing, launch services, data analytics, and ground station operations. The startup ecosystem is vibrant, with companies exploring innovative solutions to enhance the efficiency and capabilities of space missions.

Last year, the government of India announced the Indian Space Policy 2023 with the goal of encouraging private entities to participate in the space industry. Currently, India has 189 DPIIT-recognised space tech startups.

Some of the major private players in the Indian space sector are, Skyroot Aerospace Pvt Ltd, Dhruva Space, Agnikul Cosmos, Pixxel Space India Pvt Ltd, Bellatrix Aerospace, Digantara, Satellize, New Space India Ltd., and GalaxEye Space.

According to Amal Suresh P, Founder and CEO at Algon, “While the prospects of India’s space sector are promising, funding remains a critical challenge. The space sector, despite its potential, involves high costs and long gestation periods (the time period between the start of a satellite project and the time when the satellite is operational). The economic viability of space ventures is often questioned, particularly in the context of the high capital expenditure required for infrastructure and technology development. While government support is essential, the long-term sustainability of space enterprises depends on their ability to generate revenue and attract private investment.”

Funding scenario in space tech startups

According to Tracxn’s Space Tech Geo Report 2024, India’s growing space tech sector received record-breaking funding of US$ 126 million in 2023, up 7% from US$ 118 million in 2022 and 235% increase from US$ 37.6 million in 2021. However, year-to-date funding for 2024 stands at US$ 10.8 million. Skyroot Aerospace received the most funding at US$ 99.8 million, followed by Pixxel (US$ 71.7 million) and Agnikul (US$ 61.5 million).

In 2023, early-stage investments dominated the Indian space tech sector, accounting for US$ 120 million out of the US$ 126 million raised, up from US$ 114 million in 2022, a 5% increase. Early-stage funding for 2024 has totalled US$ 8.5 million. Seed-stage funding increased from US$ 4.3 million in 2022 to US$ 5.3 million in 2023, a 24% increase. Despite these advances, late-stage funding remains scarce.

Space tech funding

Source: Tracxn and Inc42
* up to date funding for 2024

There have been no acquisitions in 2024, with the exception of Arya’s acquisition of Prakshep in 2022. The sector has yet to see a unicorn, with MTAR and Ananth Technologies remaining the only publicly traded companies.

The increase in India’s funding comes at a time when the US has seen a decrease from US$ 5.5 billion in 2021 to US$ 660 million in 2024. However, India is still lagging behind the major powers, the US and Europe. The US is the world leader in space technology, and it was the first to privatise its space industry with the Commercial Space Launch Act in 1984.

In contrast, Europe’s space tech sector has thrived, raising US$ 407 million in 2024 so far, up from a record US$ 512 million in 2023. Despite funding fluctuations, the UK is rebounding, with US$ 135 million raised so far in 2024.

Srinath Ravichandran, co-founder and CEO of Agnikul Cosmos, which recently made history by launching ‘Agnibaan,’ the world’s first 3D-printed rocket engine, previously stated that the space tech sector is now more accepted in India among VCs and investors, and that the government is very serious about implementing various policy measures in this sector.

“When a company like Skyroot launches, it’s very clear that it’s a victory for paperwork. It shows that you can launch from India privately. Similarly, Dhruva and Pixxel have launched with ISRO, and we are also preparing to launch. It clearly shows that the government is very serious about implementing it,” he adds.

Space-tech industry stakeholders are also optimistic about the industry, as the Rs 1,000 crore (US$ 119.11 million) fund, combined with the establishment of the Indian National Space Promotion and Authorisation Centre (IN-SPACe) in 2022, is expected to boost the industry’s growth in the long run.

Key growth drivers

India’s competitive advantage lies in its cost-effective launch services and robust manufacturing base. As commercial satellite services expand, India’s role in providing affordable and reliable launch solutions is expected to grow, capitalising on the increasing demand from both domestic and international clients.

  • Technological advancements: India has demonstrated remarkable technological capabilities through ISRO’s various missions. The successful deployment of the Polar Satellite Launch Vehicle (PSLV) and the Geosynchronous Satellite Launch Vehicle (GSLV) has established India as a reliable launch service provider. Additionally, missions like Chandrayaan-2 and the Mars Orbiter Mission (Mangalyaan) have showcased India’s prowess in deep space exploration.
  • Cost optimisation: Indian space tech companies are well-known for their resourcefulness. They concentrate on using existing technologies in novel ways and creating simpler, more efficient solutions.
  • Government Support: The Indian government has taken significant steps to liberalise the space sector. The Space Sector Reforms (2020) and the establishment of IN-SPACe (Indian National Space Promotion and Authorisation Centre) to encourage commercial engagement demonstrate this commitment.
  • Rising demand for space-based applications: The need for earth observation data, navigation services, and satellite communication is increasing dramatically, opening up attractive potential for downstream industries.
  • FDI: The union cabinet’s decision to liberalise the space industry by permitting 100% FDI in the production of components and systems or subsystems for satellites, ground segments, and user segments, represents a significant growth potential and driver for the Indian space sector.
  • Skilled workforce: India’s demographic dividend, with a large pool of skilled engineers and scientists, is a significant asset.

Challenges facing the sector

The regulatory environment for the space sector in India is evolving. While recent policy reforms aim to encourage private participation and investment, there remains a lack of clarity in regulatory guidelines. Despite its promising potential, the Indian space sector faces several challenges that need to be resolved to utilise its full potential.

  • Funding: Despite an increase in investments, many entrepreneurs still struggle to raise money. Creating a strong venture capital ecosystem with a focus on space technology can provide much-needed momentum.
  • Skilled talent: The sector needs workers with specific knowledge in fields like space physics, rocket science, and aerospace engineering. This skill gap can be filled in part by creating strong educational initiatives and encouraging cooperation between academia and industry. Due to their talents and expertise, around 30-40% of talent in the space tech industry currently consists of former ISRO employees, largely in full-time consultant and senior jobs.
  • Infrastructure and technological gaps: India’s space infrastructure, while advanced, faces limitations, particularly in large-scale manufacturing and testing facilities. The country relies heavily on imports for critical components, which not only increases costs but also raises concerns about supply chain security.
  • Competition and global positioning: The global space sector is highly competitive, with established players like the United States, Russia, and emerging space-faring nations like China making significant advancements.

Future outlook

The future of India’s space technology industry is full of opportunities. India’s successful Moon missions have sparked enthusiasm for further space exploration. We can foresee enterprises focused on lunar landers, rovers, and possibly human spaceflight missions. Companies will continue to spend in R&D to make space technology more accessible and cost-effective, pushing the limits of space technology and exploring novel uses. The idea of Indian firms entering commercial space tourism may be on the horizon, increasing the industry’s awareness. As India’s space technology industry grows at a rapid rate, the demand for competent individuals in a variety of fields will also increase.

India’s space technology industry is positioned for a bright future. With a supportive government framework, a thriving private sector, and a growing need for space-based solutions, India is well positioned to become a significant player in the global space race. As the country seeks to achieve new heights, the sky is definitely the limit for its space technology goals.

Leave a comment

Subscribe To Newsletter

Stay ahead in the dynamic world of trade and commerce with India Business & Trade's weekly newsletter.