India’s Finance Minister wants to establish a venture capital fund for space economy startups. Speaking during the government’s FY2024/25 budget presentation on July 23, 2024, Nirmala Sitharaman said the fund, to be set up with seed funding of more than AUD181 million, highlighting the government’s commitment to advancing the Indian space industry.
“With our emphasis on expanding the space economy fivefold within the next ten years, a venture capital fund of 1,000 crore will be set up,” the minister told parliamentarians. The fund will provide financial resources to promote innovation and expansion in the space sector. Approximately 180 government-recognised space technology startups are expected to directly benefit. The minister’s announcement follows the successful Chandrayaan-3 and Aditya L-1 missions in 2023.
Pundits forecast the Indian space economy to grow from its current USD8.4 billion to USD44 billion by 2033. Last year, investment in Indian space startups increased to USD124.7 million. Currently, India’s share of the global space economy is between 2% and 3%. But the long-term goal is to achieve a 15% market share by mid-century. To get there, the Indian government is relying on private sector involvement, and many of the government’s space initiatives, financial and non-financial, directly target the private sector.
“We previously advocated for increased financial incentives to support the burgeoning space startups in the country,” said A.K. Bhatt, director general of the Indian Space Association, after the minister’s speech. “The announcement of a venture capital fund is a step forward, addressing the funding challenges these nascent ventures face in this capital-intensive domain.”
“This sends the message that the government is serious about growing the sector, and the funds will have a multiplier effect,” an India-based venture capitalist with stakes in local space startups told the Economic Times. “We believe the trust and focus from the government, combined with the foreign direct investment announcement earlier this year, will lead to more investments.”
Earlier this year, the government allowed 100% foreign direct investment in the manufacture of satellite components without official approval and eased the rules for launch vehicles. In her speech this week, Sitharaman also said she would axe India’s so-called angel tax, a levy imposed on excess capital raised over fair market value. Investors in all Indian sectors, including the space sector, welcomed the tax’s abolition and said it would spur India’s startup scene.
India’s Economic Survey 2023-2024, tabled 24 hours ahead of the budget speech, noted that India currently has 55 active space assets in orbit, including 18 communication satellites, nine navigation satellites, five scientific satellites, three meteorological satellites, and 20 Earth observatory satellites.
In addition to the venture capital fund, the government allocated the Department of Space the equivalent of AUD2.36 billion for FY2024/25, which runs through March 31, 2025. This was a 17.8% increase on the FY2023/24 budget allocation.
Sitharaman did not disclose the precise details of the venture capital fund. However, space industry trade groups say it is likely to be a multi-year outlay and will be professionally managed, with every rupee that gets invested expected to generate a generous payoff.
