Budget 2024: Space fund of ₹1000 crore a multi-year outlay, to be managed professionally

As the details remain to be announced, industry stakeholders said the space fund could have a multiplier effect by assuring international investors of the Centre’s role as an anchor customer and stakeholder in space ventures.

“With our continued emphasis on expanding the space economy by five times in the next 10 years, a venture capital fund of ₹1,000 crore will be set up," finance minister Nirmala Sitharaman said on Tuesday. This was alongside a ₹1 trillion ($11.9 billion) fund to boost private-sector research and development for commercial product development—a factor that numerous industries have backed so far.

Also Read: Lack of internal demand hurting India’s fledgling space economy

IN-SPACe, the Centre’s nodal space approval and promotions body, will not be the entity tasked with managing and distributing the fund, a senior government official said.

Narayan Prasad Nagendra, chief operations officer at Dutch space firm Satsearch, said the biggest impact of such a fund is in defining the Centre’s role in the private space sector.

“Governments typically do not place bets on a single company—their goal is to see an industry succeed. As a result, such a fund becomes more impactful as the Centre backing private space startups assures global big-ticket investors to back such companies, too. A government’s outlay of ₹1,000 crore could thus have a multiplier effect in terms of its industry impact," Nagendra added.

Comprehensive support

Vishesh Rajaram, managing partner of early-stage deep-tech VC fund Speciale Invest, concurred.

“Money typically has a multiplier effect, and can actually lead to drawing 10x the capital from outside sources. The space industry targets $44 billion in valuation by 2033—this fund can catalyse India’s prospects here," Rajaram said.

However, while the fund has been largely welcomed, many industry stakeholders remain cautious. Anil Prakash, director-general of industry body Satellite Industry Association of India, said other factors that will need to be co-developed alongside a dedicated fund include “comprehensive support for startups."

“This (support) includes tax incentives, regulatory clarity, and the government acting as an anchor customer. By enabling space manufacturing through a production-linked incentive scheme, addressing pending defence offset obligations, and streamlining procurement processes, we can ensure sustained demand and funding for our space economy," Prakash added.

India’s space economy was valued at $8 billion at end-2023 by the Department of Space, accounting for 2% of global private space operations. This, as IN-SPACe said in its ‘decadal vision’ framework, could rise to $44 billion in net valuation by 2033.

However, industry stakeholders have underlined that the key to achieving this target would be to build internal demand from central and state government-affiliated organisations. Alongside offering the fund, the Centre’s backing could be vital in cementing its position as an anchor investor and customer.

On 24 June, S Somanath, chairman of the Indian Space Research Organisation (Isro), the nation’s central space agency, said that building domestic manufacturing capabilities for the space sector will be essential to draw global investments. This, in turn, can be boosted by such a fund.

Also Read: Can Indian space startups wow Musk with indigenous tech?

Private space startups have attracted $380 million in net funding as of December, according to data from the Indian Space Association. The highest-funded space startup was Hyderabad-based Skyroot Aerospace, with net proceeds of $95 million. However, these figures pale in comparison with their US counterparts.

Elon Musk’s SpaceX raised a landmark $1 billion in VC funding from search giant Google and investment firm Fidelity in 2015. Space launch services firm Rocket Labs raised $288 million, as per data from Tracxn.

For each of them, demand from government agencies is key to helping private space firms ramp up revenue—a factor that remains at preliminary levels in India right now.