Indian Council of World Affairs

Abstract: With the recent launch of a sounding rocket, Gujarat has become the first state to take a direct step into India’s expanding space sector. The article traces India’s transition from a centralised space model toward a more federated space economy, highlighting the growing role of states and raising a key question — why states, such as Gujarat, Tamil Nadu, Karnataka and Telangana and others are developing space-tech policies? 

Introduction: 

For many years, India’s story in space has been about national pride, strong scientific work and the aspiration to become self-reliant. India established itself as a space power with a developmental focus on public, weather and communication satellites. However, in the past few years, this has begun to change significantly, and the Indian space sector is expanding beyond a singular institutional focus. The establishment of IN-SPACe and the various state-sponsored space policies have begun to allow for a more organised and structured space economy. Earlier, the space economy was largely driven by the central government. It is now opening to wider participation from states and private actors. This process does signal a new model of growth for the Indian space sector with greater emphasis on collaboration and, more importantly, experimentation and innovation. 

Change in India’s Space Perspective 

International space law mandates that outer space is to be used for peaceful purposes only. The expanding participation of states and private actors does not alter India’s international legal responsibility, which remains vested in the Union government. While the Union government remains the sole authority for international treaties and space diplomacy, the growth of state-sponsored space activities expands the range of actors internationally engaged with India’s space sector. 

With the establishment of ISRO in 1969, the foremost aim was to use space technology for the development of the nation. The first few decades of India's space programme were characterised by a strong sense of public purpose instead of commercial ambition. Eventually, India proved that it was capable of performing complex missions at a fraction of the global costs with the success of the Mars Orbiter Mission, Chandrayaan 3 and many others. 

With the evolution of global space activity into a commercially and strategically important sector, India's traditional model was becoming inadequate. The emergence of private sector players, such as SpaceX, Rocket Lab and Blue Origin, demonstrated that innovation and efficiency are fostered in more open systems. The Government of India, recognising this shift, initiated a process aimed at liberalising the country’s space sector. The notable reform was the establishment of IN-SPACe in 2020, the first of its kind agency under the Department of Space, which is responsible for the regulation, promotion, and authorisation of private sector participation in all space activities.[i]

The establishment of IN-SPACe was a milestone in India’s space governance. It was not only an administrative change; it was a change in the governance framework. IN-SPACe represents controlled decentralisation—delegating economic participation while retaining regulatory authority and international liability at the centre. IN-SPACe is a facilitator, an authorising entity within the Department of Space acts as a bridge between ISRO and the private sector. Recently, IN-SPACe has also signed an MoU with the governments of Gujarat, Tamil Nadu and Karnataka.[ii] It is partnering with other state governments to establish dedicated space-manufacturing clusters across India, with a focus on developing a robust ecosystem for manufacturing space-grade components. 

Why Are the States Entering Space? 

The states are not concerned with the regulation of launches or international treaties, which are the exclusive domain of the Union government and its space agencies. Rather, the focus is on industrial development, local job creation and investment in space-related industries. As space technologies increasingly merge with other technologies, such as manufacturing, electronics, IT and data analytics, state governments are beginning to realise the advantages of developing local space ecosystems. 

The opportunity and necessity driving the federal turn in India’s space economy are two-fold. On one hand, the national reforms provide “space” for more new players. On the other, there is an understanding at the state level that, in the current context of the 21st century that economic growth and development will manifest in the form of high-value, high-technology industries, especially those that are synergistic and overlapping with space tech, namely aerospace, microelectronics and AI. For state governments, space is not merely a scientific endeavour but an industrial development opportunity that can attract investment, create jobs and stimulate innovation. 

Additionally, India’s states recognise the benefits of satellite-enabled services. Satellite data is revolutionising public services for precision in agriculture, disaster management, environmental monitoring, urban planning, etc. States can also empower themselves to provide better public services by leveraging satellite data and fostering ecosystems of cooperation among universities, start-ups and research institutes. This combination of economic growth and development is the rationale for the states like Gujarat, Tamil Nadu, Karnataka and Telangana to adopt space policies. 

Gujarat 

Gujarat has officially declared a SpaceTech policy for 2025–30, becoming the first Indian state to do so.[iii] This was a symbolic and strategic move, as Gujarat is home to the headquarters of IN-SPACe in Ahmedabad and the Space Applications Centre (SAC) of ISRO. The state has realised that it can build an industrial ecosystem for space manufacturing, satellite component production, and related services. As expected, the policy framework has led to several initiatives. Recently, in March 2026, a startup in Ahmedabad became the first company to launch a sounding rocket for the state that tested several key systems like propulsion, avionics, recovery and also weather data collection. The site for this rocket test is near Bavaliyari of Dholera, and the rocket reached an altitude of roughly 3 kilometres. Gujarat’s Space-Tech policy is the first of its kind in India, and officials say it is a boost for indigenous space technology.[iv]

The Space Policy of Gujarat aims to build a space industrial ecosystem that encompasses the complete cycle of manufacturing and services. The state seeks to draw private investment by developing infrastructure, creating fiscal incentives and implementing other facilitation methods. It encourages specific clusters and industrial infrastructure where firms can design, prototype and manufacture satellites, launch vehicle components and related technologies, and also promotes collaboration between industry, research and academia.

Tamil Nadu

Tamil Nadu's Space Industrial Policy, unveiled in 2024, offers one of the most comprehensive and visionary proposals at the state level in the country. The state government understands the existing electronics and IT ecosystem in the state along with the automotive manufacturing ecosystem and the presence of a large number of engineering colleges.[v] The focus of the policy is not to start from scratch but rather to identify existing industries in the state that can be enhanced by adding space technology and thereby develop industries related to satellite manufacturing, components and supply chains for launch vehicles and data analytics.

The policy also describes the construction of space parks in select districts (likely to be Chennai, Hosur and Coimbatore); the provision of testing and integration facilities; the establishment of start-up incubation facilities and venture funding; and the identification of a few major academic institutions, such as IIT Madras and Anna University, to collaborate with the government in the development of a space industry workforce. The policy also emphasises the need for the government to use satellite data to support more effective governance, including the monitoring of agricultural productivity and the control of urban sprawl and coastal areas.[vi] Tamil Nadu’s policy demonstrates integration with industrial and developmental applications with a clear understanding of how the two can economically and socially benefit the state. It enables the state to be a strong contender in research and data-based governance and technology transfer while also supporting the initiatives of the union government in positioning India’s space economy internationally.

Karnataka

Karnataka is recognised as the “space capital” of India. Bengaluru is home to ISRO’s headquarters and its principal research centre, as well as a large cluster of aerospace and defence companies. In the past decade, the city has also hosted several emerging space companies, such as Bellatrix Aerospace which is pioneering new technologies for small satellites and launch systems. It is in this context that Karnataka is putting together its first state space policy (2024-29)[vii], which has the potential to consolidate its position as the most innovative state in India’s space sector. The new policy aims to emphasise the need for research and development, public-private partnership ecosystems and a nurturing environment for start-ups. The policy targets nearly 50 per cent share of India’s space economy and around 5 per cent of the global space market, indicating Karnataka’s ambition to position itself as a major global space hub.[viii] Karnataka’s policy offers an excellent model for a state building on its own historical or geographical strengths in a new era of commercialisation. Rather than competing with ISRO, the state is seeking to complement it by enabling private firms and academic institutions to innovate within the same ecosystem.

Beyond Gujarat, Tamil Nadu, and Karnataka, other states such as Telangana[ix], Andhra Pradesh[x] and Maharashtra[xi] are beginning to explore space-related initiatives. Telangana, with its established geospatial industry in Hyderabad, is focusing on data analytics and applications rather than manufacturing. Andhra Pradesh, which hosts the Satish Dhawan Space Centre at Sriharikota, has the potential to develop launch support services and logistics. These states are also framing geospatial and drone policies that overlap significantly with space-based applications.

India’s experiment with state-level space policies stands in contrast to other major spacefaring nations. In the United States, while states such as Florida, Texas, and California compete to host launch sites and aerospace firms, international responsibility and strategic direction remain tightly coordinated at the federal level through agencies such as NASA and the Federal Aviation Administration. China, while maintaining strong central authority over strategic and military dimensions of its space programme, has increasingly permitted sub-national initiative in its commercial space sector — with cities such as Beijing, Shanghai, and Shandong releasing their own space sector action plans. However, this provincial activity remains subordinate to national priorities and operates within a governance framework shaped more by party and military channels than by a unified civilian space law. India occupies a distinct institutional middle ground: allowing sub-national initiative in industrial development while retaining centralised control over regulation, diplomacy, and liability. This hybrid model reflects India’s broader approach to governance and could offer an alternative pathway for other federal or developing states seeking to expand their presence in the global space economy without abandoning international commitments. 

How Does Federalisation Benefit India's Space Programme and Economy?

The involvement of states represents more than just administrative diversification; it is a structural evolution that benefits India’s space programme and economy in multiple ways. First, it expands the industrial base. When states promote manufacturing, component production and ground infrastructure, they help build the supply chains that a growing space industry requires. This reduces India’s reliance on imports and creates domestic value addition.

Second is the enhancement of innovation. Smaller and agile startups and enterprises are often more capable of developing innovative and creative ideas than larger enterprises. By fostering a local incubation and funding ecosystem, federalised states are able to spawn entities in specific niche areas like propulsion, satellite design or earth-observation analytics. This ecosystem of innovators bolsters the research and national missions of ISRO.

The third benefit is the more pronounced utilisation of domestic space services. Through more extensive use of satellite data in their planning, agriculture and disaster management, the state governments create consistent demands for space applications and services. This sustains the market viability of space companies and brings in further investments to the market.

Fourth, federalisation encourages regional equity and inclusiveness. India’s high-tech industries have historically been located in a limited number of urban centres. The spread of space-industrial activities across several states will ensure that the technological advancements and employment opportunities will be accessible to a larger population.

Lastly, the cumulative impact of these developments will increase resilience and global competitiveness. A decentralised and multi-actor ecosystem is less prone to bottlenecks and can scale rapidly and extensively. This puts India in a position to engage more substantively in the global space economy, not just as a launch service provider but as a comprehensive space nation.

Challenges of a Federated Space Economy

While promise exists with the federalisation of India's space economy, the challenges at hand must not be overlooked. Since there are multiple state-level space economies formulating their own policies, there are concerns on the possibility of overlaps, competing for the same investments and regulatory conflicts. Healthy competition may foster innovative advancements. However, excessive fragmentation in competition may dilute the available resources and create confusion for investors.

Resource constraints are also significant and unavoidable. When it comes to the development of satellite assembly and ground control, the infrastructure is highly capital-intensive, and development requires a high degree of specialisation. Such factors also mean that not all states will be able to obtain the financial and technical means to support the development of the objectives. Additionally, the development of skills in the areas of aerospace engineering, materials science, and satellite operations is lacking, which further limits the development of regional ecosystems and the extent to which they may be able to develop.

Further, challenges continue to exist with regards to global competitiveness. The Indian states aiming to lure global companies and become a part of the international supply chains must satisfy a range of quality control measures and have an effective system of protection of intellectual property. In the absence of these, the prospects of federalisation may continue to remain under-realised.

The Way Forward

With Indian engineering available at the least cost, alongside a large and rapidly growing domestic market with a skilled workforce, the opportunities are significant in the space sector. In addition, the participation of states enhances benefits through local specialisation. For instance, in India, we can have a complete value chain system where Gujarat focuses on manufacturing, Tamil Nadu on data analytics and electronics and Karnataka on innovation and R&D while Telangana can have a lead in geospatial services.

There is a need for an adequate degree of central-state coordination to ensure the success of the federalised space economy in India. A suggestion for the authorities could be to formalise a coordination structure that includes the states as well as ISRO, IN-SPACe, the Department of Space and state government representatives. This would facilitate the exchange of best practices, incentivise coordination, and ensure that state initiatives complement the national initiatives instead of being in competition.

There will be a need to establish a clear division of assignments. The central government will take care of regulations, international relations, and mission direction, while the states will promote industry, training and integrated governance, and space data. Consistency in state space policies will support the innovation of policies that address the needs of the individual states while fostering the development of state policies.

Equally important is the expansion of the states’ built-in facilities for testing, integration, and other satellite ground control infrastructures that start-ups and other companies can share. Every initiative should have sustainability as the core focus. States should go beyond subsidisation and tax relief and establish real demand and market-driven ecosystems. Sustainability should guide every initiative. Rather than relying solely on subsidies or tax breaks, states need to cultivate ecosystems that are driven by real market demand. Encouraging industries to design for exports, participate in global value chains and maintain quality standards will help ensure long-term viability. Transparency, ease of doing business and strong intellectual property protection will also make Indian states more attractive to investors.

Lastly, a cultural change is required, with emphasis on collaboration. India's space federalisation hinges on whether central agencies, state governments, industries, academics, startups, and new businesses can see and treat each other as partners instead of rivals. As for the case of ISRO, it can continue its leadership role in national missions and support state-level industries through knowledge and infrastructure. It can also help with advanced state industries. With such coordination, the different levels of government can develop an Indian model of cooperative federalism in space, a model that reflects India's diversity and uses its federal tools.

Conclusion

Remarkable indigenous ambition and ingenuity have always characterised space exploration. The evolution from ISRO's centralised model to IN-SPACe's facilitative paradigm and the growing involvement of state governments represents an institutional evolution in which a centrally governed space programme is increasingly supported by a federated economic ecosystem. The federalisation of the space economy is now extending India's space activities beyond a national scientific endeavour to an all-encompassing economic undertaking, including manufacturing, services and governance.

India’s next challenge is, therefore, not only technological or economic, but institutional. Coordination, clarity of roles and alignment with international norms will determine whether federalisation becomes a force multiplier or a source of fragmentation. If successful, India’s approach may offer valuable lessons for other emerging powers navigating the tension between national sovereignty, subnational ambition and the collective management of outer space. In this sense, India’s space journey is no longer only about reaching the stars — it is about shaping how humanity governs the space beyond them.

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*Keshav Verma is a Research Associate at the Indian Council of World Affairs (ICWA)
Disclaimer: The views expressed are personal.

Endnotes

[i] “About us - IN-SPACe,” n.d. https://www.inspace.gov.in/inspace?id=inspace_about_inspace_v3.

[ii] Thakur, Aksheev. “110 IN-SPACe Authorisations Issued to Pvt Players Since 2020 - the Tribune.” The Tribune, December 10, 2025. https://www.tribuneindia.com/news/india/110-in-space-authorisations-issued-to-pvt-players-since-2020/.

[iii] Udasi, Zarna. “Gujarat’s SpaceTech Policy: What’s Inside and How Industry Leaders View the Path Ahead.” ETGovernment.Com, April 26, 2025. https://government.economictimes.indiatimes.com/news/technology/gujarats-spacetech-policy-whats-inside-and-how-industry-leaders-view-the-path-ahead/120634424#:~:text=Zarna%20Udasi,electricity%20duty%2C%20and%20interest%20subsidies.

[iv] News On AIR. “Gujarat Marks Milestone in Space Research with First Sounding Rocket at Dholera | DD News on Air,” n.d. https://www.newsonair.gov.in/gujarat-marks-milestone-in-space-research-with-first-sounding-rocket-at-dholera/.

[v] Government of Tamil Nadu. “Draft Tamil Nadu Space Industrial Policy 2024,” 2024. https://tidco.com/wp content/uploads/2024/06/Draft%20Tamil%20Nadu%20Space%20Industrial%20Policy.pdf.

[vi] Ibid 5.

[vii] Department of Electronics, Information Technology and Biotechnology. “Karnataka Space Technology policy, 2024-2029 (Draft),” 2024. https://eitbt.karnataka.gov.in/uploads/media_to_upload1733573412.pdf.

[viii] Ibid

[ix] Emerging Technologies Wing, Information Technology, Electronics & Communications (ITE&C) Department, Government of Telangana. “SpaceTech Framework,” April 2022. https://startup.telangana.gov.in/wp-content/uploads/2023/02/Telangana-SpaceTech-Framework.pdf.

[x] Usthadian Experts. “Andhra Pradesh Space City and Defence Hubs - Current Affairs Usthadian Academy.” Current Affairs Usthadian Academy, December 18, 2025. https://www.usthadian.com/andhra-pradesh-space-city-and-defence-hubs/.

[xi] Archit_Tandon. “Maharashtra to Launch Space Tech Policy in Next Three Months.” Communications Today, March 7, 2025. https://www.communicationstoday.co.in/maharashtra-to-launch-space-tech-policy-in-next-three-months/.