India’s space tech story has come a long way, but Union Budget 2026 may shape the sector’s next decade of growth. The government targets growing the space economy to $44 billion by 2033, with Earth observation, communication, navigation, launch services, and in-orbit services as core segments.
In the Budget last year, the total allocation for the Department of Space increased to ₹13,416.20 crore, an increase of approximately 14% from the previous year’s revised estimates to support missions like Chandrayaan-4 and the Venus Orbiter Mission. However, the Indian Space Research Organisation (ISRO) was only able to execute five launches in 2025.
The buzz is still strong. Last year, ISRO was able to demonstrate space docking. States including Karnataka, Tamil Nadu, Andhra Pradesh, and Gujarat upped the ante with space policies dedicated to fostering private sector growth, manufacturing, and innovation. Private funding returned after a slow patch, with the Indian National Space Promotion and Authorisation Centre (IN-SPACe) and SIDBI Venture Capital also launching a dedicated ₹1,000 crore fund.
For the upcoming Budget, startups now seek clarity on demand, tax reform, procurement, and insurance support.
Launches Continue Despite Setbacks
ISRO’s missions over the past year reflected both ambition and risk. The EOS-N1 mission aboard PSLV-C62, the launch carrying 16 payloads in total, experienced an anomaly during the third stage. Earlier, another PSLV setback (C61 launch in May 2025) raised concerns, but startups signalled resilience across the ecosystem.
As launch cadence rises, some founders want policy to look beyond rockets and satellites. Sakthikumar R, founder and CEO of OrbitAID Aerospace, says India must rethink where value is created.
“To secure long-term leadership in the space economy, India must evolve from a launch-enabled nation to an in-orbit systems nation,” he tells AIM, adding that the Union Budget should introduce a National In-Orbit Infrastructure Mission focused on satellite life-extension, autonomous refuelling, and active debris risk management.
He adds that shared testbeds and mission-risk frameworks would reduce barriers for private firms. “By institutionalising failure-tolerant innovation and open access to ISRO-class facilities, India can set global standards for sustainable, service-driven space operations,” he says.
At the same time, private firms have expanded downstream capabilities. Geographic information systems software provider Esri India partnered with Dhruva Space to widen access to satellite data. AWS expanded its Space Accelerator programme to support 42 Indian startups. Even global startups such as Starcloud drew attention for training large language models in space using NVIDIA H100 chips.
Agendra Kumar, managing director at Esri India, says geospatial technologies are being recognised as critical technologies for national security, governance, and economic development. The National Geospatial Mission, announced in the Union Budget 2025, also strengthened India’s geospatial infrastructure and data ecosystem.
He adds, “As the next step, the government must allocate adequate funds so that the roll-out of this programme can gain speed and provide the data and infrastructure to support numerous other programmes and initiatives of various ministries.”
Funding is Back But Still Uneven
Private capital into Indian space startups came back with a bang after a relative lull in 2024, with startups including Pixxel, TakeMe2Space, Agnikul Cosmos, Skyroot Aerospace, and EtherealX raising private equity. Downstream analytics companies, too, raised early rounds.
However, founders say capital alone does not solve scale challenges. Long development cycles and delayed revenues make space different from other deep tech sectors. Industry bodies argue that access to low-cost capital depends on how the government classifies space assets.
The Indian Space Association (ISpA) and Deloitte India have urged the government to recognise space and satellite infrastructure as critical infrastructure. Such a move could reduce financing costs and unlock long-term lending. The recommendations include including space infrastructure under the Harmonised Master List of Infrastructure Sub-Sectors and enabling access to bonds, viability gap funding, and development finance institutions.
Rashmit Singh Sukhmani, co-founder and CTO at SatSure, says, “As we look to Budget 2026–27, recognising space and satellite infrastructure as critical infrastructure and enabling predictable demand, including government procurement mandates, will be key to unlocking long-term, infrastructure-grade capital for an industry with 5–7 year gestation cycles.”
While funds and policies today strongly support satellite manufacturing and launch, there is also a need to invest in compute infrastructure.
“As satellites generate massive volumes of sensitive data, greater focus is needed on data storage, processing, and GPU nodes for geo AI, along with expanding ground station networks in India, so this data can be securely stored and processed within the country,” adds Gaurav Seth, co-founder and CEO at PierSight.
The Cost Question
Manufacturing remains a pressure point for the sector. Import dependence for space-grade components raises costs and delays schedules. Companies argue that existing tax structures treat space hardware the same as general electronics, creating friction.
Keyur Gandhi, director of space regulatory and commercialisation at Dhruva Space, says, “Introducing dedicated, granular HSN and SAC codes for space-grade components and services—distinct from general aerospace or electronics—would reduce GST burdens, unblock input tax credits, and provide clarity on domestic value addition and import dependence.”
He also notes that extending SEZ-equivalent indirect tax benefits could lower project costs and unlock working capital.
Additionally, operational delays matter. Shravan Bhati, co-founder and CEO of SatLeo Labs, says, “For payload and satellite startups, importing critical tools and components still requires licences that take 4–5 months, even for government-recognised companies, leading to avoidable launch delays.”
“There is a strong case for single-window, fast-track clearances and smoother customs processes for strategic space tech imports,” he adds.
Demand is Still Missing
While supply-side incentives exist, companies stress that demand creation matters more. Government procurement remains limited, and pilots often fail to scale.
Krishanu Acharya, co-founder and CEO of space data analytics firm Suhora Technologies, points out, “We expect targeted measures to accelerate the downstream space economy, particularly in converting satellite data into actionable insights for defence, agriculture, disaster management, and climate resilience.”
“We need the Budget to bridge the gap from pilots to scale,” he asserts.
Industry bodies propose procurement mandates that require a fixed share of government space spending to flow to private firms. Similar models exist in the US and Europe. ISpA proposed a 50% mandate for sourcing space-based services and hardware from Indian private entities.
The procurement debate also extends to how the government evaluates technology. Several founders argue that price-led tendering discourages the development of advanced capabilities, especially in strategic domains. Sanjay Kumar, founder and CEO of EON Space Labs, notes that the current approach limits innovation.
“The L1 system prioritises price over capability, sidelining private firms offering more advanced technologies,” he says. Kumar pointed to recommendations from the Economic Survey and defence procurement reviews, calling for quality-cum-cost based selection (QCBS) for high-technology purchases.
“We recommend a mandatory adoption of QCBS for high-technology procurements in EO-IR systems, optical payloads, and advanced sensors, with technical-to-commercial weightage ratios from 60:40 to 80:20,” he remarks.
He adds that indigenous manufacturing must also go beyond assembly. “We also request an Indigenous Content Premium allowing up to 20% price preference for vendors demonstrating core design and manufacturing capabilities in India.”
While programmes such as iDEX, which aim to create self-reliance in defence and aerospace, have expanded startup participation, founders say structural gaps remain between prototyping and scale.
“The iDEX programme has been transformative, with over 430 contracts signed and ₹449.62 crore allocated for FY 2025–26,” Kumar mentions. “However, defence startups face structural challenges.”
He flags the transition between lab success and commercial deployment as the weakest link, pointing out that there is a need to bridge the technology readiness levels (TRL) 4–5 gap, a critical stage where most innovation falters.
He adds that startups should be guaranteed procurement commitments after successfully completing iDEX challenges. This will help convert prototypes into orders without the need to re-tender under the L1 bidding system.
States are also stepping in.
Karnataka has set an ambitious target to capture 50% of India’s space market by 2033, leveraging its legacy as the nation’s primary space hub. Not far behind, Madhya Pradesh recently launched its SpaceTech Policy-2026, eyeing ₹1,000 crore in investment by positioning itself as a center for satellite manufacturing and geospatial applications.
For India’s space ecosystem, Budget 2026–27 may matter less about the numbers and more about the intent.
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