Nirmala Sitharaman announces Rs 1,000-crore VC fund in a boost for space economy

Indian Space Research Organisation's Chandrayaan 3 lander Vikram on the lunar surface

Finance Minister Nirmala Sitharaman on July 23 announced that the government will set up a venture capital fund of Rs 1,000-crore for the space sector.

"With our continued emphasis on expanding the space economy by 5 times in the next 10 years, a venture capital fund of Rs 1,000 crore will be set up," Sitharaman said while presenting the Budget for the financial year 2024-25.

This announcement gains significance in the light of the Indian Space Research Organisation (ISRO's) recent achievements, including successfully landing Chandrayaan-3 near the Moon's South Pole, and space tech startup Agnikul Cosmos' successful launching of its maiden rocket.

Other space tech startups such as Pixxel, Digantara and Piersight Space have also attracted VC investments, signalling a growing demand for homegrown space tech solutions.

Industry body Indian Space Association (IsPA) which represents over 40 space tech startups, apart from bigger players such as Airtel, One Web and so on lauded the move.

"We previously advocated for increased financial incentives to support the burgeoning space startups in the country. The announcement of a ₹1000 crore VC fund is a step forward, addressing the funding challenges faced by these nascent ventures in this capital-intensive domain. Additionally, the proposal for establishment of 12 industrial parks across India we hope will include the space sector as this will provide a substantial boost to the space and satellite manufacturing industry, which has long called for the creation of space parks," Lt Gen (retd) AK Bhat, director general of IsPA said.

In a statement, Awais Ahmed, CEO of Pixxel Space said, "The announcement of a 1000 crore VC fund in the Union Budget 2024-25 for the space sector is a groundbreaking development. This fund will provide crucial financial support to innovative startups and companies, enabling them to scale their technologies and contribute to India's space ambitions. Such a significant investment underscores the government's commitment to fostering a robust and dynamic space ecosystem."

"At Pixxel, we are excited about the opportunities this fund will create to advance space technology and drive economic growth. While we recognise that even larger funds will be needed as the sector grows, this is an excellent start and a vital stepping stone. This initiative marks a significant step forward for India in the global space industry," Ahmed said.

Srinath Ravichandran, CEO of Agnikul Cosmos said, "Wonderful news for all of us in the sector. This will help larger players emerge out of India’s space startup ecosystem. This also shows that the Government is continuing to strongly back its vision of making India have a larger chunk of the global space economy."

Chaitanya Dora, CFO of Dhruva Space said, "As per our understanding, the Centre has constantly supported both Technology and Business Development across the Space sector. This year, the Budget synergises macro-economic expansion with targeted micro-economic interventions, catalysing the growth of the Space-Technology ecosystem, with a pronounced emphasis on bolstering private stakeholders within India’s burgeoning space sector. This strategic thrust aims to fortify India's stature as a leading Space Nation, propelling innovation and fostering a conducive environment for private enterprise to thrive in the Space domain."

On July 22, the Economic Survey hailed India's burgeoning space sector growth while acknowledging challenges such as gaps in indigenous technology development and uncertain long-term demand.

The Economic Survey, mainly observed challenges in the sector, when it came to the adoption of space technology, lack of technology needed for indigenisation, lack of competitive marketplace and so on.