With the potential decline of the IT industry on the horizon, MoneyLane is looking at the future of science and technology in India. In the last of a three-part series on the space industry, we discover the problems and the potential in the private sector through conversations with industry leaders.
What is ‘New Space’?
For decades, government organisations dominated the design, manufacturing and development of all components of the space industry. Within the context of the Cold War, both America and Russia designated their programs under defence spending with fears that the technology could be translated to missile development by the opposite side.
However, in the last couple of decades, these industries have become more open to private growth. While the space industry had always shown extraordinary progress in relation to global GDP, the last few years driven by private investment have seen unbelievable gains. In the 25 years between 1973 and 1998, global space revenue grew at an average of 6.28% in relation to an average GDP increase of 2.96%. In the next 15 years, between 1998-2013, space revenue grew at 10.65% compared to a global GDP rate of 2.72%!
Even during the depths of the 2008-09 recession, the space industry continued to grow, albeit at a lower rate. Only once, in 2010, has the global economy grown at roughly the same speed year-on-year as the space industry.
This private interest has grown for a number of reasons. NASA and other government agencies have become more willing to outsource many of their processes so that they can focus on in-house innovation. This has meant lucrative contracts for successful aerospace design companies, such as Boeing. Additionally, the growth of the internet and telecommunication services has led to a greater demand for narrow-focussed, privately controlled satellites – which in turn lead to the development of auxiliary industries that could provide one or all of satellites, launch vehicles and ground services.
Additionally, a renewed interest in human spaceflight to Mars has spurred on high profile private investors, such as Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin. With additional incentives, such as the incredible potential for asteroid mining, there has been a real boom in the so-called ‘New Space’ industry this decade.
The Rise of ‘New Space’ in India
ISRO’s hope, since, the 1960s, has been to outsource design and development so that the government body can focus on innovation themselves. However, since design is an expensive and risky investment, not many manufacturers have been willing to take the risk. Therefore, ISRO has been forced to complete the entire range of services for launches, and are far ahead of private companies technologically.
Before we can understand the state of the private industry, we have to draw a line between the old space and new space companies. While the new companies, such as Astrome and Xovian, have ambitious motivations, the old space companies are firmly rooted in trying to make a profit. Thus, the older companies are heavily centered on manufacturing, rather than innovation.
In contrast, the new space industry has the opposite problem. There is an overabundance of enthusiasm and ambition, but a lack of options. Yashas Karanam, one of the co-founders of Bellatrix Aerospace, demarcated the problems facing new companies into three categories – technical difficulties creating barriers to entry, a lack of long-term investors, and a lack of ambition in the auxiliary manufacturing industries.
In USA, their long history of technological achievement in the field has been well documented, and is available to any (American) company that needs a crash course. This easy access to information, which would otherwise take years to uncover, breaks down a major barrier to entry in the private sector. Additionally, their scientific infrastructure is far more developed than the facilities available in India, which translates to additional costs for startups in the latter.
Karanam was also made the point that finding investors in India was extremely difficult. Most of the local venture capitalists struggle to see how they could make a profit in the space industry. Even the few that appreciate the importance of the work are reluctant to spend money because they can’t understand the specifics. Despite having impressed ISRO with their independent designs at their first meeting in 2015, Bellatrix Aerospace are only just closing in on their first significant private investment today.
Karanam’s last grievance was about the situation of the auxiliary manufacturing firms in the space industry. As mentioned above, these companies are happy to create parts, but are unwilling to design them. For ISRO, this is just an innovative blockade, as they have to spend more time at the drawing board. However, for the private firms, this is also an economic blockade because much needed resources now have to be diverted to creating simple but time consuming designs.
The Future of ‘New Space’
While the problems seem insurmountable, there are some inherent solutions in the market. Karanam himself states that the larger perception of the space industry is changing. Investors are starting to slowly see the long-term benefits of space companies, while facilities are available if you are the cream of the crop. ISRO themselves are happy to lend out facilities to appropriate projects, while Bellatrix Aerospace is currently interned at the Indian Institute of Science in Bangalore.
Additionally, the issue of technical barriers to entry will slowly subside as the Indian industry makes more discoveries in the field. Sanjay Srikanth Nekkanti, the co-founder of Dhruva Space, has stated that he would like to eventually move towards education, while Karanam also agreed that today’s industry leaders would probably be tomorrow’s professors.
Finally, the policy to allow increased FDIs in the private space industry has been hailed as a good move by both Dr. Neha Satak of Astrome and Ankit Bhateja of Xovian. They agree that this law will be a boost to technological innovation in India, although they also claim that Indian companies and the government will have to be vigilant to make sure foreign firms do not try to dominate the market.
According to Rakesh S., the Chairman-cum-Managing Director of Antrix, we will not even have to worry about a Western domination of our manufacturing centres. America’s inability to share high level technology with the outside world means that they will not be able to take advantage of India’s cheap production hubs. Moreover, the very nature of the space industry – which requires quality-intensive work over labour-intensive work – means that they will not have to worry about being replaced by automation for a long time.
What is the State of the Space Industry?
At the end of the day, our biggest advantage is undoubtedly our cost effectiveness. From the Mars Mangalyaan mission in 2014 – which was completed with a smaller budget than the Hollywood blockbuster Gravity – to the recent launch of the GSLV Mk-III, our great innovation is developing reliable products for cheap. Bellatrix Aerospace is a great example of this advantage. For an investment of just US $2 million, they plan to develop pioneering electronic propulsion systems. Impressively, they even hope to be profitable in two years.
Furthermore, unlike every other industry in India, the space industry doesn’t have to worry about being exploited for its low costs. The restrictive laws on trading space technology encourages our private industry to focus on development rather than worry about better equipped foreign competitors. According to Ankit Bhateja of Xovian Technologies, with the right government policies and funding, and a focus on innovation over winning a ‘space race’, there is no reason why we can’t see exponential growth in the coming years. There might even be a place for publicly traded companies or large projects like Blue Origin.
Thus, despite a low share of the global space market, a lack of funding and a struggle for innovation, there is a strong strain of optimism that runs through the industry. Everyone interviewed for this piece had their own opinions, but they all came to the same conclusion – the Indian space industry is on the right track. Even Madhavan Nair went as far as to say that ISRO has probably been the government’s most successful program.
Tarutr Malhotra is a co-founding editor at MoneyLane. You can find him on Twitter @TarutrMalhotra