How India can scale its space economy through innovation - EY

India’s Strategy to Scale Its Growing Space Economy Through Innovation

India’s space sector is undergoing a historic transformation, transitioning from a state-run scientific endeavor into a highly commercialized global ecosystem. While the country is historically celebrated for the cost-effective, high-success missions of the Indian Space Research Organisation (ISRO), scaling its market share requires a radical shift toward private sector innovation. According to strategic analysis from professional services firm EY and industry stakeholders, India must leverage its burgeoning startup ecosystem, liberalized foreign investment policies, and downstream applications to unlock its next phase of growth. This evolution is critical not only for technological sovereignty but also for capturing a larger slice of the multi-billion-dollar global space market.

The Shift to a Private-Sector Led Model

For decades, ISRO operated as the sole architect of India’s space endeavors, managing everything from satellite manufacturing to rocket launches. However, to scale the domestic space economy from its current valuation of approximately $8.4 billion to an ambitious target of $44 billion by 2033, the government realized the model had to change. The introduction of the Indian Space Policy 2023 officially codified this transition.

Under this modern framework, ISRO is shifting its focus away from routine manufacturing and launch operations to concentrate on cutting-edge research, deep-space exploration, and technology development. The operational and commercial duties are being distributed to specialized entities:

• IN-SPACe (Indian National Space Promotion and Authorization Centre): Acts as a single-window autonomous agency to promote, authorize, and supervise private sector space activities.
• NSIL (NewSpace India Limited): Serves as the commercial arm, responsible for acquiring technologies from ISRO and outsourcing manufacturing to private industries.

This restructuring allows private enterprises to access ISRO’s world-class facilities, reducing the capital expenditure barriers that typically prevent startups from entering the aerospace sector.

Fostering Innovation in Launch Vehicles and Satellites

Innovation is at the heart of India's strategy to capture a larger share of the global launch market. Private launch providers, such as Skyroot Aerospace and Agnikul Cosmos, are pioneering technologies designed to make satellite deployment faster and cheaper.

For instance, Agnikul Cosmos successfully launched a rocket powered by a single-piece, 3D-printed semi-cryogenic engine. This technological milestone dramatically simplifies the manufacturing process, reducing production time from months to days. Similarly, Skyroot's Vikram series of launch vehicles focuses on modularity, allowing custom-built rockets to cater to the growing demand for small satellite constellations.

By focusing on customizability and quick turnaround times, Indian companies are positioning themselves to meet the global demand for launching small satellites into Low Earth Orbit (LEO).

Downstream Applications: Where the Real Value Lies

While rocket launches capture public imagination, market analysts emphasize that the launch segment accounts for only a small fraction of the global space economy. The true commercial value—representing over 70% of the market—lies in downstream applications, including satellite communication (SatCom), Earth observation, and geospatial analytics.

Indian startups are rapidly innovating in these areas to solve terrestrial challenges:

• Precision Agriculture: Satellite imagery combined with AI helps farmers monitor crop health, predict yields, and optimize water usage.
• Disaster Management: Real-time Earth observation data allows authorities to track floods, cyclones, and forest fires, enabling faster emergency responses.
• Infrastructure and Urban Planning: High-resolution satellite data assists in tracking road construction, managing coastal zones, and monitoring urban sprawl.

By transforming raw satellite data into actionable business intelligence, Indian technology firms can serve global enterprises, multiplying their revenue potential beyond domestic borders.

Overcoming Funding and Regulatory Obstacles

Scaling a capital-intensive sector like space technology requires consistent, long-term funding. Historically, Indian space startups relied heavily on domestic venture capital, which was relatively modest compared to the funding available to Western competitors.

To address this capital bottleneck, the Indian government amended its Foreign Direct Investment (FDI) policy in early 2024. The liberalized rules now allow:

• Up to 74% FDI under the automatic route for satellite manufacturing and data products.
• Up to 49% FDI under the automatic route for launch vehicles and associated systems.
• Up to 100% FDI for manufacturing components and systems/sub-systems for satellites and ground segments.

By easing these entry barriers, India has made its space sector highly attractive to global institutional investors, paving the way for joint ventures and cross-border technology transfers.

Key Steps for Sustainable Growth

According to industry assessments, maintaining this momentum requires continuous policy refinement and infrastructure development. Key recommendations include:

Developing Dedicated Space Parks: Creating specialized manufacturing clusters equipped with testing chambers, cleanrooms, and shared research labs will lower overhead costs for smaller startups.

Strengthening Intellectual Property (IP) Protections: Clear guidelines on IP ownership for technologies co-developed by private firms and ISRO are essential to build trust and attract foreign collaborations.

Fostering Academic Integration: Universities must collaborate with industry players to update aerospace engineering curricula, ensuring a steady pipeline of skilled professionals capable of working with modern technologies like additive manufacturing and AI-driven telemetry.

Through coordinated policy execution and a relentless focus on high-value downstream technologies, India is well-positioned to evolve from a low-cost service provider into a global powerhouse of space innovation.

Frequently Asked Questions

What is the current target for India's space economy?

India aims to scale its space economy from approximately $8.4 billion to $44 billion by the year 2033, striving to secure roughly 8% to 10% of the global space market share.

What is the role of IN-SPACe?

IN-SPACe (Indian National Space Promotion and Authorization Centre) is a single-window, independent nodal agency created to promote, facilitate, and authorize private sector participation in Indian space activities, including the usage of ISRO infrastructure.

How have India's FDI rules changed for the space sector?

In 2024, India liberalized its FDI policy to allow up to 100% foreign investment in satellite component manufacturing, up to 74% in satellite manufacturing and operations, and up to 49% in launch vehicles under the automatic approval route.

What are downstream space applications?

Downstream applications refer to services that utilize data collected by satellites. Examples include satellite internet (broadband), weather forecasting, maritime tracking, precision agriculture, and GIS-based urban planning mapping.

Which private companies are leading launch vehicle innovation in India?

Startups like Skyroot Aerospace and Agnikul Cosmos are leading private launch vehicle development. Skyroot successfully launched India’s first privately developed rocket (Vikram-S) in 2022, while Agnikul has pioneered the use of 3D-printed rocket engines.

Why is the private sector crucial for scaling India's space economy?

While ISRO has achieved remarkable scientific feats, a state-run agency has capacity limits. Private sector participation introduces commercial agility, attracts global venture capital, drives cost-saving manufacturing innovations, and scales downstream consumer applications much faster.