Indian budget 2024: A $120mn VC fund to propel India's nascent space startups 

Since 2020, India has seen significant growth in the number of space sector startups. It is a direct result of the Indian Government introducing reforms that permitted private firms to carry out all space activities, including the building and launching of privately-developed rockets and satellites, providing space-based services etc.

Today, India has nearly 200 space sector startups, all of whom are operating in a capital-intensive, high-risk, low-return domain, which is dominated by India's Government-run Indian Space Research Organization(ISRO). In order to support such nascent firms, the Indian Union Budget has allocated Rs.1000cr(approx $120mn) as a Venture Capital Fund for space startups. Finance Minister Nirmala Sitaraman announced that the Indian government will set up a Rs.1,000 crore venture capital fund to finance the space economy.

Welcoming the announcement, Lt. Gen. AK Bhatt (Retd.), Director General, of the industry body Indian Space Association (ISpA) said, "The proposal for establishment of 12 industrial parks across India we hope will include the space sector, as this will provide a substantial boost to the space and satellite manufacturing industry, which has long called for the creation of space parks. These measures are pivotal for the growth and development of India's space ecosystem."

The Indian Government's decision to infuse Venture capital into the space sector is based on a vision to bring about five-fold growth in the Indian Space sector. In recent years, the Indian space economy has been pegged at $ 9 billion, and this is barely two per cent of the $ 450 billion global space economy. With more startups and commercial activity by larger conglomerates, ISRO's commercial arm, the Indian Government sees significant potential in the sector. Having a diverse set of offerings from the government and private sector can enable Indian entities to tap into foreign markets.

The SatCom Industry Association of India opined that the government needed to offer tax incentives, provide regulatory clarity and offer contracts to startups. "By enabling space sector manufacturing through Production Linked Incentives (PLI), addressing pending defence offset obligations, and streamlining procurement processes, we can ensure sustained demand and funding for our burgeoning space economy", said Anil Prakash, DG, SIA-India.

To further liberalize the space sector, in February 2024, the Indian Government permitted Foreign Direct Investment(FDI) in this strategic domain. This is a bold move that would help infuse foreign capital into Indian space ventures. "We also anticipate the continued streamlining of Foreign Direct Investment (FDI), a critical policy lever for the private Space sector, poised to significantly enhance capital accessibility and drive ecosystem growth forward," said Chaitanya Dora, CFO & Co-Founder of Dhruva Space.