Lack of internal demand hurting India’s fledgling space economy

Somanath’s statement underlined the ongoing plight that industry stakeholders feel could see the Indian space economy underperform against revenue projections, and in turn, also hamper early-stage private space startups.

Stating that demand for space launches will not “come from outside," Somanath, who is also the secretary in the department of space, said at the gathering that at the moment, there is “no demand" for Isro’s workhorse rocket, the Polar Satellite Launch Vehicle (PSLV). The latter conducted three commercial launches in each of the past two years for various central government divisions and agencies. Nearly six months into 2024, Isro has not conducted a single commercial launch mission for any Indian entity.

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To be sure, a ‘commercial’ launch pertains to satellites that are not built by Isro for scientific research purposes.

This has created an issue. Back in October 2022, consultancy firm EY India and industry body Indian Space Association (Ispa) projected that India’s private space economy will be valued at $13 billion by the end of calendar year 2025. In October last year, government-affiliated space promotions body Indian National Space Promotion and Authorization Centre (In-Space) put out a decadal vision, wherein it projected the value of the local industry, including orders from within India as well as from outside, at $44 billion by 2033.

In December last year, the department of space valued India’s space market at around $8 billion. This accounted for around 2% of a global $400 billion space industry—a figure that In-Space expects to balloon to 8% within the next decade.

While 2033 still remains far away, industry stakeholders believe that both the above-mentioned projections are well off-target. The reason for this is an apparent change to the way space projects were allocated in India.

“Until last year, space missions in India for Isro worked on a supply-driven model, wherein Isro would create supply by building a rocket based on funds issued to it from the ministry of finance. This central issuance model worked well purely because any government-affiliated body under any ministry could simply ask for satellite launch capacity aboard an Isro rocket depending on their need. Now, this model has moved to a demand-driven model, wherein Isro would supply rockets only based on the demand that they see from the market," said Narayan Prasad Nagendra, chief operations officer at Dutch space firm Satsearch.

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Nagendra’s assessment is on point. A senior official close to developments at Isro told Mint on condition of anonymity that the demand-driven model in question has created conflicts in terms of how government bodies pursue space missions. “No global space economy has ever been successful without the government being the primary customer for public as well as private sector firms. In India, government departments and agencies under various ministries are conflicted regarding the allocation of funds to Isro, which is creating this said demand shortage in the market. In short, there is no single body with budget allocation available to enable commercial space projects within Isro," the official said.

Expanding government expenditure in the space sector will be key to India’s space sector reaching its target. One ideal global precedent lies in the US—where Nasa, its central space agency, outsourced various space launch vehicle construction and multiple other services to private companies such as Boeing, Lockheed Martin and SpaceX. India, with a young space sector that was thrown open to private players only in 2020, will look to emulate the US—but government contracts will be key, experts said.

Nagendra and the official mentioned above both said that In-Space, on this note, should be the ideal regulator—but as of today, does not have an allocated budget to work with. Pawan Goenka, the In-Space chairperson, could not be reached for a comment.

Isro did not respond to an emailed query from Mint.

A second senior executive at one of India’s top space firms told Mint on condition of anonymity that in a second closed-door meeting, the Isro chairperson underlined to investors that rocket launch services are largely loss-making in nature, further compounded by a paucity of demand. It is because of this that the internal demand generation process needs to be ramped up, the executive said.

Space Industry Challenges

Startups, too, are getting affected. Anirudh Sharma, co-founder and chief executive of Peak XV-backed space mapping firm Digantara, said, “Getting satellite orders from other countries could have multiple regulatory challenges for a space company to navigate. The US is a key example of such regulatory challenges. That is one of the reasons why our domestic space economy can never grow unless our own government’s divisions create demand for upstream markets. In the long run, this can help private startups as well in terms of orders, scale and funding."

As the Indian market is slow to grow, Digantara is soon set to expand its official presence in the US, in hopes of better commercial prospects.

A third senior executive aware of developments at India’s most heavily-funded space startup, Skyroot Aerospace, said that the company plans to host only one launch mission by the end of 2024. In February this year, In-Space’s annual launch schedule had stated an expected four launch missions by Skyroot Aerospace by March 2025—a figure that two industry officials said is now entirely unlikely to be achieved.

The executive close to Skyroot’s plans told Mint that while the company’s conversations with global clients have progressed since there is interest in finding an affordable satellite launch operator servicing the most popular lower orbits beyond Elon Musk’s SpaceX, “It is also very important to strategically grow internal demand—both from private firms and the government sector, to further boost the market opportunity."

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Going forward, industry stakeholders said that it would be crucial to address these shortcomings, if India was to even reach a cumulative space economy valuation of $4 billion within the next decade. Satsearch’s Nagendra said that to effectively resolve this, India would need “a strategic autonomy to set a roadmap for the space industry as well as budgetary autonomy to take actions that achieve the roadmap and strategic goals."

Nagendra also underlined Japan’s space model as one that India should look to emulate, in turn handing more finances and agency to In-Space. “Japan has a startups initiative programme, as well as a second programme that allows space companies to get contracts to build technologies, and then be a space services provider. They are also pairing large companies with smaller ones, which is supporting a good pace of development—wherein the confidence and stability of large corporations combine with niche innovations of smaller companies."

“The country also has several industry officials on an advisory board of its prime minister, in order to give its central government innovative thinking towards opening up the sovereign purse for the space sector," he added.