12. Indian Space Program 2026-27: Consolidation and the \'Death Valley\' Challenge

The Indian space sector has successfully transitioned out of its post-pandemic stagnation, moving toward a phase of sustained consolidation. While the state-led program shows fiscal stability, the industry faces significant structural and financial bottlenecks that hinder India\'s ambition to capture 10% of the global space economy by 2030. Key Highlights of the Space Budget and Industry Trends • Fiscal Recovery & Growth: The 2026-27 budget estimate for the Department of Space (DoS) is ₹13,705.6 crore, a 5.3% increase over pre-pandemic peaks. When internal resources from NewSpace India Ltd (NSIL) are included, the total ecosystem expenditure reaches approximately ₹15,000 crore. • Shift to \'Build-Phase\' Hardware: Capital expenditure has seen a significant jump (nearly ₹1,066 crore over revised estimates), signaling a transition from preparatory planning to actual hardware realization for major projects like Gaganyaan and Next-Generation Launch Vehicles (NGLV).• The \'Death Valley\' Gap: Startups face a critical liquidity crunch between initial R&D and first revenue. Despite the announcement of a ₹1,000 crore Venture Capital fund, industry bodies (ISpA and SIA-India) argue that equity alone cannot solve high hardware burn rates and long gestation periods. • GST and Inverted Duty Structure: Space companies currently face a \'hidden 18% tax.\' While final products (like satellite launches) are often exempt, firms pay high taxes on raw materials and imports without the ability to claim Input Tax Credits (ITC), making \'Made in India\' hardware less competitive globally. • Demand for \'Critical Infrastructure\' Status: Classifying space assets (ground stations, launch pads) as critical infrastructure would reduce the cost of capital by 2-3%, allowing startups to move away from high commercial interest rates (10-12%) toward long-term institutional lending. • Institutional Delineation: The sector now operates through a tripartite structure: ISRO (focused on R&D and exploration), IN-SPACe (the promoter and regulator for private entities), and NSIL (the commercial arm managing production and technology transfer). Key Definitions • Death Valley: The period in a startup\'s life cycle where it has begun operations but has not yet generated revenue, often leading to failure due to high capital requirements. • Zero-Rated GST: A regime where the entire supply chain is tax-exempt, allowing manufacturers to claim full refunds on input taxes, thereby improving liquidity. • Space-Grade Components: Highly specialized hardware designed to withstand extreme radiation, vacuum, and thermal cycles of outer space. • NGLV (Next Generation Launch Vehicle): A proposed cost-efficient, partially reusable rocket designed to replace the ageing PSLV and GSLV fleets. Constitutional and Legal Provisions • Article 246 (Union List): \'Space\' and \'Outer Space\' fall under the exclusive legislative competence of the Parliament (Entry 6, Union List), giving the Centre sole authority over space policy. • Indian Space Policy 2023: An overarching framework that transitioned ISRO from an \'operator\' to an \'R&D-focused agency\' while allowing Non-Governmental Entities (NGEs) end-to-end participation in space activities. • Liability Convention (1972): As a signatory, the Indian State is \'absolutely liable\' for damage caused by its space objects (including private ones) on the surface of the Earth. The lack of a domestic Space Activities Act leaves the financial liability of private players undefined. • FDI Policy 2024: Permitted 100% FDI in satellite component manufacturing and up to 74% in satellite manufacturing/operations, aiming to integrate Indian startups into the global supply chain.UPSC Relevance • GS Paper III: Science and Technology—developments and their applications; Indigenization of technology; Awareness in the field of Space. • GS Paper II: Government policies and interventions; Issues arising out of their design and implementation (Structural reforms in Space). • Economic Development: Challenges of the startup ecosystem, GST rationalization, and the \'Death Valley\' in deep-tech sectors. Conclusion India\'s space program is currently at a \'rhetoric-versus-reality\' crossroads. While legal doors have been opened for private participation, the lack of a Production Linked Incentive (PLI) scheme and the refusal to grant \'Infrastructure Status\' act as fiscal anchors. For India to evolve from a \'second-grade supplier\' to a global hub, the government must move beyond being a funder of ISRO to becoming an \'anchor customer\' and a facilitator of private capital.