Budget 2024: India's space sector eyes strategic allocations and incentives

Union Budget 2024: The space sector in India is expected to reach $44 billion by 2033. Industry leaders call for incentives to push private sector growth

Stakeholders of the space industry are seeking Budget allocations to stimulate domestic demand and capacity in India’s growing space economy. Initiatives such as Production Linked Incentives (PLI), tax concessions, and low-interest loans may be able to boost the sector that is projected to reach $44 billion by 2033, as stated by Union Minister Jitendra Singh at the end of last year.

As of December 2023, India’s space sector is valued at around $8.4 billion boosted by the success of space missions Chandrayaan-3 and Aditya L1. 

Previous space Budget allocation

In the Interim Budget announced in February this year, the Indian government allocated Rs 13,042.75 crore to the Department of Space for the financial year 2024-25. This represents a notable increase of Rs 498.84 crore from the previous year’s budget. The enhanced budget is expected to support ambitious projects like the Gaganyaan mission, which aims to send the first Indian to space and establish a dedicated space station by 2035.

 

Industry challenges and government initiatives

Addressing the India Space Congress 2024 last month, Isro Chairman S Somanath highlighted that while major companies are keen to enter the space sector, they have concerns about the timeline for breaking even and securing orders. This presents a challenge in convincing investors to commit to large-scale projects.

In an interview with Mint on 26 June, Pawan Kumar Goenka, chairman of the Indian National Space Promotion and Authorisation Centre (In-Space), noted that the organisation has submitted industry demands to the Finance Ministry. Although specific demands were not disclosed, industry stakeholders anticipate that the upcoming Union Budget will include strategic incentives to generate domestic demand. These may include funds to incubate new ventures and directives for government agencies to act as customers to the industry.

Proposed incentives to boost private sector growth

According to a report by Mint, industry veterans believe that building scale for the private space sector is crucial. Some suggestions include incentives such as PLI for key components, lower GST rates, tax holidays for space startups, reduced import duties on key components, and low-interest financial loans. These measures have the potential to bolster the sector significantly.

Additionally, increased budget allocations are needed for In-Space, as it could benefit hundreds of startups. Start-ups in the space sector have already increased from just one in 2014 to 189 in 2023 as per DPIIT Start-Up India Portal. In 2023 alone, space-start-ups saw $ 124.7 million in investments.

The Centre is also currently reviewing Foreign Direct Investment policy guidelines for the Indian space sector.

Stakeholders also propose that the Budget should include more allocations in Innovations for Defence Excellence (iDex) programmes, potentially making the Centre an anchor customer for the sector, Mint reported.

Building demand and global reach

Isro Chairman S Somanath noted the potential to build demand for the private space sector through government agencies.

However, some experts caution against blanket incentives, arguing for a strategic approach that leverages India’s existing talent in launch vehicle and satellite manufacturing. Adding that incentives are required to help firms focus on capacity building and targeting global markets, according to Mint.

As India prepares for the upcoming Union Budget, the focus remains on creating a supportive environment for the private space sector to thrive.