The Finance Minister today in the 2024-25 Budget spoke about plans to set up a Rs 10,000 crore venture capital fund for India’s space sector. This will be a major boon for Indian space startups, as the number of companies has skyrocketed from just one in 2014 to over 190 by 2024. The fund will help expand the space economy five times over the next decade.
With a hefty budget allocated for India’s space sector in the interim budget earlier this year – up by Rs 50 billion from last year’s Rs 12,544 crore – the VC fund will go a long way in helping space tech startups develop indigenous technologies and solutions.
Arpan Sahoo, Co-founder and Chief Operating Officer, KaleidEO, said, “The establishment of a Rs 1000 crore VC fund addresses a critical funding gap in emerging space R&D. This initiative will be transformative in building sovereign capacity, fostering local IP creation and driving innovation. We are confident that these funds will enable startups to attract talent, set up local facilities and develop export potential for the next decade.”
“As the Indian economy and startup ecosystem, especially the new space sector, continues to grow, consistent revenue generation and performance of space tech startups will be crucial in strengthening the government’s confidence in India’s new space ecosystem.”
The fund will address the challenges in adopting space technologies highlighted in the economic survey, thereby enabling space start-ups to accelerate the adoption of these technologies.
Kannan K, co-founder, Augsense Lab, commented, “The venture fund dedicated to the space economy sends a strong message that the government recognises the importance of this sector. The allocation for research and development is also a positive step, but we await details. The space economy will benefit from the budget’s focus on agriculture, mining and shipping. Overall, this is a commendable interim budget.”
The growth of space startups
The Economic Survey 23-24 highlighted the fact that India currently operates 55 space assets, including Earth observation, weather, navigation and communication satellites. All these satellites play vital roles, ranging from Earth observation to communications and weather forecasting.
Sanjay Nekkanti, CEO and Co-founder, Dhruva Space said, “In the last 24 months, Dhruva Space has launched eight of the 24 IN-SPACe certified payloads into space across four missions. We will continue to deliver bespoke missions through payload missions hosted by Launching Expeditions for Aspiring Payloads (LEAP) for the global market. As a full-stack payload and application agnostic company, we are poised to leverage the dynamic Indian and global markets to drive innovation and deliver impactful solutions.”
As of January 2024, over 300 Indian organizations have submitted 440 applications to IN-SPACe seeking support, highlighting the country’s growing interest in the space sector. Additionally, non-governmental organizations have demonstrated their commitment to space activities by signing 51 Memorandums of Understanding and 34 Joint Project Implementation Plans.
Vipul Singh, CEO and Co-founder, AEREO further added, “The Union Budget 2024 marks a pivotal milestone for India’s drone industry. Streamlining national investments in large capital assets is critical if we plan to double our industrial growth. Drone-based solutions for planning and progress monitoring provide a strategic advantage to ensure projects are completed on time and within budget. Most importantly, incentivizing drone solutions will strengthen two key visions: building a robust infrastructure and making India a global drone hub.”
A good start, but still a long way to go
The interim budget earlier this year had expanded tax incentives to provide tax breaks to space-related start-ups and sovereign wealth fund-backed investment companies. The abolition of angel tax announced in this budget will help eliminate any adverse impact on foreign investment and will support these start-ups in the long run.
Arup Dasgupta, Editor-in-Chief, Geospatial World, said, “The space budget is focused on sustaining current activities rather than breakthroughs. The Rs 1,000 crore venture capital fund is just a start, but governments need to recognise their important role globally, both as anchor financiers and customers. The abolition of angel tax is a positive step, which, coupled with existing FDI relaxations, will attract overseas angel investors. The focus on digital mapping of land records and housing creates good opportunities for downstream companies to leverage space technology in these areas.”
With increased funding, the Union Budget has given a boost to India’s space sector and the government’s support for startups has also grown. With sustained support, India’s space sector can contribute to the country’s economic growth and homegrown technology.
