The logic behind ISRO and DRDO’s tech transfers

Akshara (0:04)

In today's episode, we'll do one deep dive and cover another story for the day. First, we'll talk about the logic behind ISRO and DRDO's tech transfers. Then we'll talk about India's changed CCTV rules.

Welcome back to The Daily Brief by Zerodha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I'm your host Akshara. Today is Tuesday, 8th September. Coming to the first story.

Imagine spending a decade solving a problem nobody else in the country has managed to solve, like a brand new missile or rocket. Once it's proven, the plan is to commercialize it, for which you might need to partner with the private sector. That's more or less what's happening inside DRDO right now. So the Defense Ministry has cleared the transfer of technology for all conventional missile systems to Indian companies, so they can manufacture missiles at scale, rather than DRDO doing it alone.

ISRO has also been walking the same road for a while. And the Indian Space Policy 2023 explicitly tells ISRO to step back from manufacturing space systems it has already mastered, and instead hand them over to industry to build and sell. Take for example, the SSLV, ISRO's compact rocket for small satellites. ISRO designed it, tested it, and got it flying. And then it ran a competition, and Hindustan Aeronautics Limited won the rights to manufacture and sell it commercially. Now, neither ISRO nor DRDO were particularly designed to make use of a factory floor. Yet, this doesn't seem to solve one pressing question. Scientists spend years, even decades perfecting technology, but why would they hand it to someone else to manufacture it once its viability is proven? Why would any organization do that on purpose? So, there are multiple reasons, and they all stem from the nature of what a research organization like DRDO or ISRO is meant to do. So, every new technology starts as an idea. Scientists test individual parts, then prototypes, then full systems, and then the conditions get closer to reality with every round.

Things break, designs get tweaked, and the cycle repeats until the organization is confident that technology works and reaches maturity. Now, early on, the question is simply, can we make this work at all?

Once something reaches maturity, the question then becomes, how do we make thousands of these reliably and cheaply? India has a legal policy framework to assess this progress collectively called Technology Readiness Levels or TRLs. So a scientist's job is to discover the unknown. And that means there are endless outcomes, each of which has an unknown probability of being achieved. Which is a lot of uncertainty. And one way to reduce it is to use public money to fund R&D efforts that don't have immediate profit motives attached. But once that uncertainty disappears, the harder problems become sourcing components, maintaining quality across a production run, and reducing unit cost. That may or may not be within the job description of a pure scientist or research lab. And that is the primary reason behind ISRO's tech transfers. See, to achieve scale and speed in mass manufacturing together, you may have to partner with other actors, including in the private sector. The government's own ambition puts India's space economy at approximately $8.4 billion today, on track for $40-45 billion by 2030

That's a scale ISRO alone was never going to build out on its own payroll.

Similarly, a brilliant missile design means very little in actual conflict if the country can't produce enough of them fast enough. But that's not the only reason for why ISRO may be asked to transfer technology. Talent is another. So once ISRO knows how to build a working rocket, the country's best propulsion scientists may not want to spend their careers supervising a production line when they could be working on the next big breakthrough technology. But third reason is the need to build an industry that survives beyond government orders. So the bigger bet is that Indian companies eventually sell rockets, satellites and imagery commercially in India and abroad. Defence exports stay far more tightly controlled given the security stakes, but approved Indian systems can still reach foreign militaries under government clearance and India's defence exports reached a record Rs.38,424 crore in FY 2025-26, up nearly 63% year-on-year. Now, inheriting a mature technology doesn't hand a company a business. It can walk away with world-class know-how and still fail if nobody's buying their product. Capital-heavy industries like space and defence need steady, predictable demand to justify investments in factories, machinery and a trained workforce. But that demand isn't guaranteed just because the technology works. So the real measure of this experiment then was never going to be how many technologies DRDO or ISRO managed to sign away. It's whether the companies receiving them actually manufacture at scale, win repeat orders, improve the product and discover new customers.