PART A | Breaking Free: India's Space Sector Moves Beyond the UNION
Indian space sector has historically been government-controlled, with Indian Space Research Organisation ("ISRO") functioning as the primary driver of all space activities. During this period, ISRO focused intensely on developing indigenous capabilities, a strategy that fostered self-reliance in critical space technologies for India.
This has undergone a profound and rapid transformation, shifting from a government-dominated structure to a vibrant, commercially driven, and innovation-led ecosystem, where private entities have played an extremely crucial role. This is evidenced by the exponential growth in the number of space startups in India, which has risen from a single entity in 2022 to nearly 200 by 2024, representing a staggering 200 fold increase in just 3 years.1
The liberalisation and gradual privatisation of India's space sector have not only opened the doors to private players but also significantly altered the traditional Centre-led governance model. Historically, India's space activities were almost entirely driven by ISRO, with planning, funding, and execution centralized under the Department of Space, under the central government. However, recent policy reforms have enabled a structural transformation. Institutions such as the Indian National Space Promotion and Authorisation Centre ("IN-SPACe"), NewSpace India Limited, and the Indian Space Association have been established to facilitate private sector participation, commercial deployment, and state level engagement. It is pertinent to note that power to promulgate 'Space' related laws under the Indian constitution has not been specifically provided and both the central government and state governments are empowered to create laws on this subject.
This shift has triggered a parallel wave of decentralisation, where state governments are no longer passive stakeholders. Recognising the economic and strategic value of the emerging space economy, several states have begun positioning themselves as hubs for space innovation and investment. States like Telangana, Tamil Nadu, Gujarat, and Karnataka have proactively launched dedicated space-tech policies, established industrial corridors, and extended financial incentives, land grants, and infrastructure support to attract space-tech startups. We explore these state-level initiatives in greater detail in this article.
Further, In-SPACe has also set the ground running towards further developing the Indian private space sector, by facilitating transfer and granting utilisation rights of technologies developed by ISRO to private entities2. This initiative, in turn, empowers states to build greater capabilities and infrastructure to attract and support private space players operating within their regions. Towards this, In-SPACe has proposed to transfer the small satellite launch vehicle ("SSLV") technology to Hindustan Aeronautics Limited ("HAL"), thereby empowering HAL to take charge of manufacturing, marketing and launching the SSLV for commercial small satellite missions3.
PART B | The regulatory landscape
Norms, Guidelines and Procedures for Implementation to the Indian Space Policy 2023
The Indian Space Policy 2023 ("ISP"), introduced on August 10, 2023, serves as the foundational document for India's recent advancements in space. The Norms, Guidelines and Procedures for Implementation of ISP ("NGP") released in May 2024, provides the detailed operational and implementation framework for this policy. It outlines the comprehensive authorization regime for space activities, mandating that all entities conducting space activities to or from Indian territory or within its jurisdiction must seek authorization from IN-SPACe. We delve deeper into the specifics of NGP in the this [article].
However, from a regulatory standpoint, in the absence of statutory act and consequent parliamentary oversight, the legitimacy and enforceability of these delegated powers may be subject to legal challenge. Further, this model also comes with certain shortcomings in the form of procedural safeguards, most notably the absence of an independent appellate forum/ body to review decisions issued by IN-SPACe. Any actions taken by IN-SPACe may therefore can only be challenged before the superior courts (i.e., the High Court or Supreme Court), and a lack of specific tribunal / appellate body, similar to NCLAT (National Company Law Appellate Tribunal) or TDSAT (Telecom Disputes Settlement And Appellate Tribunal), may result in courts adjudicating on issues without specific domain knowledge.
Foreign Direct Investment in the Space Sector
The Indian government in February 2024 amended India's Foreign Direct Investment ("FDI") Policy to allow 100% FDI in space sector with an aim to attract global capital and enhanced share of global space economy. This move significantly liberalized foreign investments by allowing automatic route investments for various activities, a marked departure from the previous system where space-related investments required government approval. To understand the specific entry routes for various activities under the amended FDI policy, please refer to this [article].
State-Led Policies
While the central government has been maintaining core regulatory control and oversight over space related matters relying on the residuary powers under the union list of the constitution, this does not preclude the states from creating regulatory incentives that may play a significant role in shaping the growth of the sector. Beyond the national framework, individual states are actively competing to attract space sector investments in order to generate employment, promoting the sector and holistic development of the states. As of now, several Indian states have formulated state-level space policies to regulate the space sector within their constitutional limits and attract private investment and space based start-ups.
PART C | Mapping India's Regional Space Policies
1. Karnataka Space Policy
Karnataka, historically a hub for ISRO, has outlined an ambitious policy to sustain its position as a leading space technology destination with a vision to capture 50% of the national market by 2034, and eventually hold 5% of the global market share. The policy introduces a robust single-window clearance mechanism via a dedicated space technology cell and an incentive and grant framework for entities looking to invest in the sector.
The policy is structured around five major pillars: Skill Development, Investments, Infrastructure, Innovation & Facilitation, and Adoption & Awareness – offering over 35 targeted incentives. Key incentives include capital investment subsidies (25% for land, 20% for plant and machinery), a 50% subsidy for Effluent Treatment Plants (ETPs), and 100% exemptions on stamp duty, land conversion fees, and electricity duty. Additionally, the policy offers Provident Fund (PF) and Employee's State Insurance (ESI) reimbursement (INR 1,800 per employee per month for 2 years), directly reducing operational costs for new and expanding businesses. A notable aspect of Karnataka's policy is its proactive implementation, with certain aspects already underway even before final official approval, demonstrating strong political will and an urgency to capitalize on the sector's potential.
2. Tamil Nadu Space Policy
In addition to Karnataka, Tamil Nadu is strategically positioning itself to become a global technology hub, aiming to attract international investors and boost space-related manufacturing. The state seeks to leverage its existing industrial strengths in manufacturing, high-tech electronics, automotive, and IT/ITES sectors, and aims to attract investments to generate approximately 10,000 direct and indirect jobs over the next 5 years. A pivotal development is the upcoming Kulasekarapattinam Spaceport, which is designed to boost private sector participation in space exploration, directly addressing the need for more launch facilities. Similar to Karnataka's policy, Tamil Nadu's policy envisages for a single-window clearance system and designation of 'space bay zones' in industrial parks.
Tamil Nadu offers a comprehensive "Basket of Incentives" for companies investing between INR 25 crore and INR 300 crore. These include a 20% capital subsidy on Eligible Fixed Assets (EFA) payable over 10 years, skilling subsidies (INR 10,000 per month per person for up to 50 individuals), land cost subsidies (20-50% depending on district), 100% electricity tax and stamp duty waivers, and reimbursement for quality, product certification, and IPR costs. A payroll subsidy for Global Capability Centres (GCCs) and R&D units, along with PF reimbursement for other service sectors, further enhances the state's attractiveness. For investments exceeding INR 300,00,00,000 customized incentive packages are negotiated under the "Space Bay" framework. Tamil Nadu's focus on ease of doing business is evident through initiatives like "Guidance Tamil Nadu" and the "Tamil Nadu Single Window Portal," which features an escalation matrix that ensures issues are addressed within a stipulated timeframe, even escalating to the Chief Minister's Office if unresolved.
3. Gujarat Space Tech Policy 2025 - 2030
Gujarat has launched India's first dedicated SpaceTech Policy (2025–2030), signaling its ambition to become a major hub for space technology innovation and manufacturing. The policy anchors on 5 (five) pillars, namely skill development, investments, infrastructure, innovation and adoption & awareness. The policy offers a comprehensive incentive framework including capital subsidies (up to 25%), 100% exemption on stamp duty and electricity duty, IT/ITeS incentives, and up to INR 5,00,00,000 launch-cost assistance per satellite. The state of Gujarat will also collaborate with ISRO, IN‑SPACe, and the Department of Space to establish a Centre for Excellence and a space manufacturing park with shared infrastructure. With a target of generating approximately 25,000 jobs over the next 5 years, the policy demonstrates keen interest of the state players in the space sector.
4. Telangana Space Tech Framework Policy
In April 2022, Telangana introduced a comprehensive SpaceTech Framework Policy aimed at establishing the state as a globally recognised, end-to-end hub for space technology development. The policy similar to other state policies introduces a single-window clearance system to facilitate land acquisition, statutory registrations, and compliance. The policy also enables eligible SpaceTech companies and startups to access a range of fiscal and non-fiscal incentives available under the state's broader Industrial, Innovation, Electronics policies. Notably, this includes potential access to INR 1,300 crore state startup fund, as well as structured entry into incubation ecosystems such as T-Hub, WE Hub, and T-Works, through public-private partnerships and state-supported accelerators. The state has identified 2 areas that require shared infrastructure (public private partnership) to support the rapid growth of the sector - small satellite manufacturing units and state-of-the-art assembly, integration and testing.
Importantly, the policy's phased implementation underscores its strength - key incentives and administrative orders including land allotments and grant assistance to startups such as Skyroot Aerospace and Dhruva Space are already in effect, 2 Hyderabad-based startups that have gained national prominence for their contributions to India's emerging private space sector.
The combined strength of these national and state-level policies creates an exceptionally favourable and fertile regulatory environment designed to attract, nurture, and accelerate investment in India's space economy. However, its effective implementation will depend on how seamlessly it integrates with the regulatory oversight of IN-SPACe and ISRO, particularly in areas like launch approvals, satellite licensing, and coordination of safety protocols.
PART D | market opportunity and analysis
Current Market Size and Growth
The Indian space economy is currently valued at approximately $8.4 billion, representing about 2% of the global space market. This figure is projected to grow significantly, with government targets aiming for the sector to reach $44 billion by 2033, capturing 7-8% of the global market share.4 While India is certainly one of the fastest-growing space economies, its current global market share remains relatively smaller compared to established leaders. However, this significant gap also underscores the immense growth potential and opportunity for investors seeking to enter a rapidly expanding market.
Over the five-year period from 2020 to 2024, Indian space startups collectively have secured a total of $353.5 million funding from various investors,5 indicating continued investor interest. Industry leaders anticipate a significant pickup in investments in 2025 as leading companies approach critical commercialization milestones.6
The State Advantage
While states are not incentivised to form core space related regulatory frameworks for inter alia satellite launches, spectrum allocation, or other space management related activities, states have taken a leap to warm up to the space sector by formulating enabling policies, investing in infrastructure, and creating conducive ecosystems for space-tech innovation. This economic participation allows them to carve out a niche in the value chain, whether in component manufacturing, satellite launch stations, ground support systems, or R&D - thus aligning local development goals with national space ambitions. For instance, Telangana, with startups like Skyroot Aerospace and Agnikul Cosmos has already attracted significant private capital funding with over USD 100 million collectively in recent years.
PART E | conclusion
India's space sector stands at a transformative juncture, propelled by a liberalised legal and regulatory regime aimed at fostering private participation, foreign investment, and commercial innovation. For investors seeking exposure to a high-growth, strategically important sector with significant long-term potential and a clear path to success, India's emergence of space economy offers an unparalleled opportunity. The ISP, along with FDI relaxations and the operationalisation of IN-SPACe as a single-window regulatory body, has laid the groundwork for a more transparent and enabling industry. State-level policies are also playing a crucial role by offering targeted incentives such as capital subsidies, dedicated space parks, industry-academia partnerships, and infrastructure support. States like Telangana, Karnataka, Gujarat, and Tamil Nadu have already taken the leap to formulate and implement space-tech policies that foster innovation hubs, attract startups, and create skilled employment opportunities. Together, these combined efforts at both the national and state levels are likely to position India as a formidable player in the global space economy.
Footnotes
1. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2027137
4. FICCI-EY Report
5.https://www.reuters.com/technology/space/space-industry-funding-india-falls-55-2024-data-show-2025-01-06/#:~:text=Over%20the%20five%20years%20from,exploration%20and%20heavy%2Dlift%20rockets.
6. Supra n8
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