Last updated:November 22, 2024, 5:53 PM IST

Embrace risk, support long-term thinking and create ecosystems that make ambitious dreams come true

A pair of giant robotic arms caught the first stage booster of SpaceX’s Starship. (Image: X/@elonmusk)

We all watched in wonderful amazement as SpaceX “caught” Starship’s first stage booster with “chopstick” mechanical arms—a feat as good as catching a falling skyscraper. And one thought must have crossed all our minds: what can India do to bring about such bold innovations, such incredible moonshots? We certainly have the talent and the motivation.

It is important to realize that this is not just about technical skill. It is as much about the innovation ecosystem and specific regulations and programs that enable this kind of fundamental change in how we approach innovation. The Indian Space Research Organization (ISRO) has achieved laudable success with its frugal innovations, but we need to think about what kind of ecosystem enables private companies in India to take huge technological risks that SpaceX routinely takes. And this is not only about the space sector, but about innovation in general.

So while we look at the space sector specifically in this paper, the ideas can be applied across industries.

To begin with, let’s be clear about one thing – money is important. There is no doubt about it. Deep capital markets make all this risk-taking possible. There is only so much moonshot innovation that poverty can dream up. But that’s not the only ingredient in the secret sauce we’re looking for here. It includes an environment where failure is considered just another stepping stone to success. We explore two broad areas where the Indian government can begin to shape such an environment – ​​regulation and financing.

Regulation – Balancing safety and innovation

India has taken some steps in the right direction with its space sector reforms, increasing the participation of private players. However, there is still much to do. The US government’s approach to the space sector, particularly with SpaceX, offers some very valuable lessons.

The Commercial Space Launch Amendments Act of 2004 expressly treats spaceflight differently from traditional aviation. It allows for “informed consent” and experimental permits for testing. The Federal Aviation Administration’s (FAA) Office of Commercial Space Transportation operates under a “permissive by default” principle for test flights, requiring companies to demonstrate that public safety is protected, not that each system is perfect.

If you compare this with the Indian regulatory scene, you can see that much is left to be desired. For example, IN-SPACe still requires multiple approvals from various agencies even though it is designed to be a one-stop-shop for space regulation. A startup testing a new propulsion system would need permission from PESO, environmental authorities and several ISRO centers, and perhaps a few others as well. The process of technology transfer from ISRO to private actors is also, more often than not, an individual negotiation process on a case-by-case basis. The framework for liability remains unclear, unlike specific legislation such as the US Commercial Space Launch Act that limits the liability of private companies and provides government indemnification above certain thresholds.

Of course, the fact that leadership styles influence a company’s success story cannot be ignored. But more often than not, India’s regulations make it difficult to adopt a technological approach, something that, for example, Elon Musk is adopting in his companies. SpaceX, for example, built $2 million worth of rockets by purchasing raw materials instead of using expensive aerospace suppliers. In India, however, regulations would stifle this approach by insisting on using only approved suppliers, or by having industrial licenses that require pre-defined processes and supplier relationships.

Changes to approved designs would have to undergo new regulatory approval cycles in India. This type of culture does not encourage flat hierarchies that are receptive to innovation. About our provisions such as The Factory Act requires detailed approval for each process change, failing to follow SpaceX’s “test, fail, fix, test again” philosophy. Rapid iteration and testing becomes impossible and things progress glacial pace should not make it difficult to run 24/7 test cycles require robust and not restrictive accident liability laws.

For vertical integration to work and pay dividends in the form of innovation, we cannot have our rules requiring separate entities for different business activities. Deploying a multi-skilled workforce is critical, which labor laws can complicate at times. Zoning laws separate manufacturing from R&D facilities, but co-located manufacturing and design teams help spur innovation. Tax structures can sometimes favor outsourcing over vertical integration.

If we want to encourage quick decision-making, we cannot afford to have conservative and risk-averse corporate governance regulations. Requirements for board approvals for decisions need to be seen from this angle. Big spending is essential to progress, but these cannot always be viewed with suspicion as part of the process. Board accountability encourages conservative decision-making. Therefore, we need technical freedom reforms, corporate governance reforms and balanced work and safety frameworks.

Tesla’s story offers another crucial lesson: the power of integrated innovation ecosystems. Building cars wasn’t just what Tesla did; it created a complete ecosystem including charging infrastructure, battery technology and autonomous driving systems. Such integrated ecosystems foster innovation.

For example, UPI’s success shows how creating open digital infrastructure can create innovation across sectors. We need to create innovation zones where companies can operate with greater freedom and can access world-class infrastructure. SpaceX’s Starbase in Texas shows how dedicated innovation zones can accelerate development.

Government support – rewarding results

In the US, government contracts trigger a virtuous cycle that permeates the entire ecosystem. NASA’s Commercial Crew Program provided crucial early contracts while allowing SpaceX to retain intellectual property rights and pursue commercial opportunities. We demand concrete programs like NASA’s Commercial Orbital Transportation Services (COTS), which gave SpaceX $396 million in milestone payments instead of traditional cost-plus contracts. Critically, COTS also allowed the same flexibility for SpaceX when it came to IP rights and commercial opportunities. NASA served as an anchor customer, guaranteeing a baseline revenue stream. This model of government as an anchor customer in addition to a regulator has proven transformative.

Let us imagine how this could work in India. Instead of being bound by traditional funding mechanisms and procurement methods, government agencies can offer performance-based contracts to startups working on critical and emerging technologies – from defense technology to climate solutions.

The Anusandhan National Research Foundation (ANRF), which has been envisioned as an apex-level body providing strategic direction to research and development in the country, could be envisioned as an Indian counterpart to the Defense Advanced Research Projects Agency (DARPA) of the United States, providing the Technology Readiness Level (TRL) and milestone-based funding for high-risk, high-reward projects, while allowing companies to own the resulting IP and benefit from the commercialization of the resulting innovations.

This would require amendments to India’s procurement rules – the General Financial Rules (GFR) – to allow for different types of procurement contracts. There is also the concept of evaluating the results of projects based on whether good faith efforts were made and whether there was any explicit abuse. This will again require changes in our procurement rules, as well as training of our judicial machinery in deciding such cases.

SpaceX’s success is built on a foundation of deep private capital. These venture capitalists are willing to bear enormous risks associated with space technology because of the government’s stabilizing power as an anchor customer. This is in stark contrast to the Indian government’s approach to demand-driven space missions, which seeks to invest in space technology based on private sector demand, rather than creating the demand itself.

The Indian government, in its efforts to encourage private space companies, has set up a venture capital fund to help with financing, but even this approach has drawbacks. That could deter private investors and require the government to make complex investment decisions – a task they may not be well-suited for. A better approach would be for the government to use this budget to buy services directly from these startups. This would simplify the role of government, direct funds to startups that can deliver results and attract private investors to successful companies. To implement this effectively, new financing models with different profit sharing and incentive structures need to be developed. This too requires support in law.

Embrace risks and long-term thinking

What would an Indian SpaceX look like? Maybe it’s not in space at all, but in renewable energy, biotechnology or quantum computing. The key is that ambitious innovators need an environment where they can take big risks, fail fast, and keep pushing boundaries. This means rethinking everything from our bankruptcy laws to our education system. We need to transform India’s innovation ecosystem from a permit-based system to a performance-based one, moving away from subjective approvals to objective criteria, much like how SpaceX operates under clear FAA guidelines rather than case-by-case permits.

Embrace risk, support long-term thinking and create ecosystems that make ambitious dreams come true.

Arindam Goswami and Ashwin Prasad is Research Analyst at Takshashila Institution, Bengaluru. The views expressed in the paragraph above are personal and solely those of the authors. They do not necessarily reflect the views of News18.