• Research & Analysis Services I Academic I Market & Industry I Government Policy I
Analytics
India’s Space Odyssey: An Economic Approach

India’s Space Odyssey: An Economic Approach

When the son of a small fisherman looked at the sky, his eyes filled with dreams that shaped India’s future, he went on to launch India’s first satellite launch vehicle, became the “Missile Man of India” and also served as the 11th President of India.

Dr APJ Abdul Kalam, and countless renowned scientists, including Vikram Sarabhai, Satish Dhawan, U. R. Rao, K. Radhakrishnan, and many others nurtured a vision for India’s space marvels, and today we are progressing rapidly toward achieving their dreams.

Have you ever checked the weather app before planning for a vacation or making travel arrangements? Or booked an Uber or ordered a takeout? Downloaded a movie to watch on your airplane flight? Used GPS to navigate across the city?

If you answered yes to any of these, then you’ve experienced firsthand the invisible hand of space technology shaping your daily life. But the impact goes far beyond convenience. Space exploration is already on its way to be an important driving force for global economies.

India currently holds a 2-3% share of the global space economy, valued at an estimated US$9.6 billion in 2020 (according to Invest India). It is projected to reach US$13 billion by 2025, with ambitious plans to capture 10% of the global market share by 2030.

Several factors are responsible for charting this growth trajectory.

Firstly, a hallmark of India’s space program has been its remarkable cost-efficiency. Pioneering missions like Mangalyaan, the first Mars orbiter, stand as testaments to this approach, achieving significant scientific results at a fraction of the expense incurred by other spacefaring nations.

According to a statement given by S Somanath, chairman of ISRO, “It is not going to be a low-cost exercise. Sending humans to the moon, we need to develop launcher capabilities, laboratories, and simulation systems. It cannot be done just once. It needs to be done multiple times. Only then it will be possible to have a human mission from India to the moon.”

While the success of various space missions within low budgets is appreciated, the growth of India’s space economy will require more investments and technological upgradation.

Secondly, the Indian space sector is witnessing a surge in private participation. This is a natural outcome if we expect faster growth of the space economy owing to the faster technology absorption capacity and investments from the private sector.

Sustainability is another important factor that is gaining traction. There’s a growing trend among Indian space startups to develop reusable launch vehicles (RSLV). Companies like Abyom and Space Philic are focusing on this technology, aiming to reduce launch costs and minimize space debris, making space exploration more sustainable.

The economic benefits extend far beyond the immediate space industry. Space research has a ripple effect, leading to advancements in various sectors. Technologies developed for spacecraft find applications in telecommunications, agriculture, weather forecasting, and disaster management. For instance, advancements in satellite imaging have revolutionized precision agriculture with drone technology for soil analysis, checking crop health and irrigation, allowing farmers to optimize resource usage and improve crop yields.

The Indian space budget has surged sharply in recent years. From its humble beginnings, it has steadily climbed from Rs 34.9 crores in 1975-76 to Rs 13,042.75 crores in 2024-25, reflecting the country’s growing commitment to space exploration and its economic potential.

Source: Budget Documents

Challenges on the Startup Launchpad

The Indian space tech startup scene is experiencing explosive growth. In 2023 alone, over 189 startups emerged, eager to stake their claim in this burgeoning industry. These companies are innovating across various segments, from satellite manufacturing and launch services to space-based internet solutions and geospatial data analysis.

This entrepreneurial spirit is fostering job creation, with over 45,000 individuals currently employed in the Indian space industry.

Despite the exhilarating growth, space tech startups in India face several challenges:

  1. Funding Gap:  Securing funding for early-stage space ventures can be difficult. The high upfront costs associated with research and development deter some investors. Additionally, traditional funding institutions might lack the expertise to evaluate the risks and rewards of space tech investments.
  2. Technological Hurdles:  Bridging the technological gap with established spacefaring nations remains challenging. Startups may require access to advanced technologies or infrastructure that might not be readily available domestically. The promotion of indigenously developed technology will be the key focus to achieve self-reliance in India’s space economy.
  3. Regulatory Landscape:  Navigating the regulatory environment for space activities can be complex. Streamlining regulations and fostering a more agile and innovation-friendly approach is crucial for encouraging private participation. The regulatory landscape is now easing up with the liberalization of the space sector.

Opening the Final Frontier for Investment

Recognizing the immense potential of the space sector, the Indian government has undertaken significant policy reforms in recent years. A landmark move in 2020 allowed foreign companies to fully own satellite component manufacturing units in India. This liberalization aims to attract foreign investment, foster technological collaborations, and propel the Indian space industry onto the global stage.

To boost the participation of the private sector, the Union Cabinet recently approved the amendment of the FDI policy to allow 100% FDI in the space sector.

According to the Press Information Bureau, there are three broad groups of activities under the satellite sub-sector, and each group has different FDI thresholds:

  1. Up to 74% under Automatic route: Satellites Manufacturing & Operation, Satellite Data Products, Ground Segment & User Segment. Beyond 74% of these activities are under the government route.
  2. Up to 49% under Automatic route: Launch Vehicles and associated systems or subsystems, Creation of Spaceports for launching and receiving Spacecraft. Beyond 49% of these activities are under the government route.
  3. Upto 100% under Automatic route: Manufacturing of components and systems/ sub-systems for satellites, ground segment, and user segment.

Secondly, ISRO established a nodal agency called IN-SPACe to promote private participation in the space sector. Recently, IN-SPACe authorized the first two private firms, Dhruva Space Pvt. Ltd. (Hyderabad) and Digantara Research & Technologies Pvt. Ltd (Bengaluru), to launch their payloads. This marks a significant step towards a more open and vibrant space sector in India.

These reforms are aimed at increasing investments in the space sector, development of state-of-the-art technologies, and increase in employment of highly-skilled labor in India, all of which ultimately lead to the growth of GDP. Industry experts believe that India’s space sector is poised to become a magnet for global talent and resources, transforming the nation into a leading spacefaring nation.

International Collaborations

Space exploration transcends national boundaries. ISRO actively collaborates with other spacefaring nations and international organizations. The rationale for international collaboration, along with examples of current and ongoing projects, according to ISRO, are as follows:

Why Collaborate?

International cooperation is crucial for space programs as it fosters relationships that consider political, economic, cultural, and scientific factors. Recognizing space as a global concern, India actively seeks international partnerships for various endeavors.

Since its inception, ISRO has embraced international cooperation. From establishing launch stations to conducting groundbreaking missions like Chandrayaan-1, several projects have involved international partners.

India’s Role in the Global Space Economy

ISRO fosters international ties through bilateral and multilateral agreements with space agencies and organizations. They aim to:

  • Strengthen existing relationships
  • Tackle new scientific and technological challenges
  • Develop space policies
  • Promote peaceful use of outer space
  • India is seen as an emerging space power, offering cost-effective and efficient solutions.
  • Developing nations often look to India for assistance in harnessing space technology.

Examples of Successful Collaborations

Chandrayaan-1: India’s lunar mission included international payloads, leading to the joint discovery of water molecules on the moon with NASA

Megha-Tropiques: A joint mission with France to study the tropical atmosphere and climate.

Saral: Another French collaboration for studying the ocean using satellite altimetry.

Ongoing and Future Collaborations

  1. NISAR: A joint NASA-ISRO mission for Earth observation studies using Synthetic Aperture Radar.
  2. TRISHNA: An earth observation satellite mission with France using a thermal infrared imager.
  3. Lunar Exploration: ISRO and JAXA are exploring a joint mission to study the moon’s polar region.
  4. Gaganyaan: ISRO is exploring cooperation with space agencies for astronaut training and life support systems for its human spaceflight program.
  5. UNNATI:  An ISRO initiative offering an 8-week training program on nano-satellite development for participants from developing countries.

By collaborating with international partners, ISRO is paving the way for India’s spacefaring goals and contributing to the global exploration of space.

According to a statement by the Vice President’s Secretariat dated 20 September 2023,

“From January 2018 to November 2022, the ISRO achieved a significant milestone by successfully launching a total of 177 foreign satellites from a diverse array of countries. So far we have launched 424 foreign satellites of which more than 90% (389) were launched in the last 9 years. USA (231), UK (86), and Singapore (20) are the top three beneficiaries of India’s International cooperation in this sector.”

Balancing Ambition with Reality: Space Spending and India’s Economic Growth

While the success of several space missions and the expanding budget of the Space Department reflects a commitment to technological advancement and economic potential, a controversial question surrounding resource allocation is often asked: Should India prioritize space exploration over immediate social issues like poverty alleviation?

While space exploration undeniably brings economic advantages, like ISRO’s affordable missions and the rise of successful private companies, poverty remains a major challenge for a significant part of the population. India’s space sector creates jobs, fosters innovation in various fields, and generates income through launch services, but this progress needs to be balanced with addressing social issues.

It is important to realize that there is no binary choice between space exploration and poverty alleviation. Budget allocation is a tricky business and a nuanced approach is necessary to answer this question.

  1. Investing in Space as an Investment in the Future: Implications of space research are not restricted to rockets and satellites. Developments in agriculture, disaster management, and communication infrastructure, all fueled by space research, can empower communities affected by poverty.
  2. Social Upliftment and Economic Sustainability: A skilled workforce is the key to success in space exploration and overall economic growth. By investing in education, especially in STEM (Science, Technology, Engineering, and Management) fields, India can build a talent pool that achieves two targets with one arrow: space ambitions and economic growth. This will, in turn, create better job opportunities, empowering people and lifting them out of poverty. 
  3. The Multiplier Effect: Funds allocated for research and development will encourage private sector investment and collaboration, further boosting the economy. This translates to increased tax revenue that can be used to fund social programs and improve the lives of all citizens.

Finding the Optimal Balance

The multidisciplinary nature of space technologies implies that India doesn’t have to choose between space exploration and poverty alleviation. A balanced approach, with continued investments in space research going hand-in-hand with strong social welfare programs, is the key. After all, a strong and prosperous nation is better equipped to tackle social challenges like poverty in the long run.

Ultimately, the debate is not about sacrificing one for the other, but about finding the optimal balance that allows India to reach for the stars while ensuring its people have a solid foundation on Earth.

The Road Ahead

India has come a long way in terms of space explorations and space technologies that penetrate a vast array of sectors in the economy. The journey is not without its challenges. Bridging technological gaps, creating a conducive environment for the private sector to grow, developing more incubation programs for MSMEs, increasing technology transfers, etc are the areas that still demand attention and are important for the long-term success of India’s space economy.

The future of India’s space sector is undeniably bright. With continued government support, an increasingly vibrant private sector, and a growing pool of skilled professionals, India is well on its way to becoming a major player in the global space economy. The sky, quite literally, is no longer the limit.

Smriti Saxena

Smriti Saxena is a Research Intern at Tatvita Analysts. She is pursuing her Bachelors in Economics.

Leave a Reply

Your email address will not be published.