ISRO, DRDO And The Rise Of India’s Military-Industrial Complex

Nearly six years after the space sector reforms, a needless controversy has emerged where a narrative has been peddled, pitching India’s space agency, the Indian Space Research Organisation (ISRO), against the commercial space companies, many of whom existed as ISRO’s space contractors for decades.

However, those sparking the controversy haven’t realised that much has changed in these six years, and India is harvesting the benefits of commercialising its strategic space and defence sectors. The government has indeed relinquished large swathes of governmental absolutist control over defence and space sector manufacturing, not to blindly cede the void to the private sector, but to serve the changing international strategic paradigm.

The Indian defence ecosystem now includes 16 Defence Public Sector Undertakings, 500 licensed defence companies and nearly 17,000 Micro, Small and Medium Enterprises that cater to the requirements of the armed forces. In FY 2025-26, the private sector’s share in defence manufacturing was 24%, up from 22% in FY 2024-25.

Beyond manufacturing, R&D is now open to the private sector, with the Defence Research and Development Organisation (DRDO), under the flagship initiatives of Development Cum Production Partner and Innovations in Defence Excellence, working with industry partners and start-ups to increase focus on R&D and commercialisation. Most recently, the Ministry of Defence approved transferring DRDO-developed conventional missile systems to the defence industry for production within the country.

This trend is also evident in the space sector, where the space economy has now reached about USD 9 billion. The Indian Space Research Organisation’s highly dependable Polar Synchronous Launch Vehicle and the new Small Satellite Launch Vehicle are now with the commercial sector. The non-governmental private enterprises are now seen as development-cum production partners that will be full system integrators and not merely be components and subsystems suppliers.

Likewise, under the Space-Based Surveillance III project, non-governmental enterprises will build 52 new satellites; India’s first privately built geostationary communication satellite is likely to be launched in 2028.

India is drawing lessons from other countries’ experiences and recognising that its strategic sectors need to scale up rapidly and the private sector can be a critical partner in this endeavour. Without industrial support, the space sector is at best a scientific pursuit, and many such space sciences do not happen without industrial manufacturing prowess. The space reforms of 2020 have not only brought industry to an equal pedestal but, as seen from large orders, have also made the shift from artisanal, exquisite low-volume manufacturing to high-rate mass manufacturing clearly visible.

Likewise, contemporary wars – from battlefields of Ukraine to the US-Iran conflict – have shown that India needs to work on making a sizable inventory of weapon systems, weapons, ammunition, and having a large cache of attritable hardware and not depend on highly expensive military assets.

Second, India also wants to increase replenishment speeds, lower per-unit production costs, and ensure no single point of failure in supply chains that adversaries and their allies can exploit. Third, modern battlefields, if they remain hot over a few weeks or months, demand that weapons and strategic hardware receive regular software updates addressing defects, electronic warfare countermeasures and, for space assets, new mission updates, in real time. Such updates then become part of active warfighting.

Fourth, countries, including superpowers, engage in a battle that factors in the adversary’s weapons stockpile, surge capacities, and supply chain resilience. Nations that were supposed to have capitulated based on stockpile estimates assessed by their adversaries could survive wars lasting many months through surge manufacturing capacity, highly secure industrial manufacturing, and in-sourcing of critical components. 

While these factors are necessary for war-fighting, in the space sector they add economic heft that expands commercial prospects. While ISRO, true to its R&D prowess, can innovate excellent space technologies, scaling them would happen only through commercial industrialisation. The space domain, which the government now acknowledges as the Sunrise Sector, cannot grow without the Indian commercial space ecosystem deploying hundreds of spacecraft a year and having uninterrupted space access.

On average, India could manage only two to three launches a year until now. In today’s context, keeping rocket manufacturing so infrequent is as good as self-inflicted space-access denial. This is particularly concerning when other nations, like the US and China, have developed a vast differential in the number of space launches.

From an economic standpoint, a large number of launches creates a vast demand in the downstream industry. For instance, the Assam government’s interest in owning a satellite for its own socio-economic and security purposes has triggered expressions of interest from as many as 13 Indian space-technology companies. Other states in India will likely follow suit and create similar demand, which will be institutionalised. Higher demand is also a key driver of ‘on-demand’ launches, where a launch vehicle is assembled for an immediate commercial requisition from the market.

On the military end, sudden tactical situations would call for ‘quick-reaction’ launch of spacecraft to meet the tactical situational needs of militaries and technical intelligence agencies. The road to on-demand, quick-reaction capability runs through commercialising launch vehicles.

However, commercialisation doesn’t equal privatisation – a fundamental nuance that the current public debate over space and defence reforms misses. Worldwide, space and military-industrial complexes run on synergy between the public and private sectors, and India is no exception. Privatisation transfers ownership; commercialisation transfers activity while ownership and direction stay with the state. India has opted for the second course of action, and deliberately so. The goal is an expanded and augmented industrial base, working alongside the state that continues to set the agenda by funding hard research and shaping strategic direction.             

(Disclaimer: Sameer Patil is Director, Centre for Security, Strategy and Technology (CSST) at the Observer Research Foundation (ORF). Chaitanya Giri is a Fellow, CSST, ORF. Views are personal.)