How India’s new Drone Bill could impact Innovation | The Daily Brief #354

Summary

In this episode of the Daily Brief, Axara discusses two major topics. First, the backlash against India's 2025 draft drone law, which threatens to stifle innovation in the booming drone industry, especially with its restrictive regulations on registration, licensing, and prototype testing. Second, the economic fallout from the U.S. tariffs on Indian exports, which has caused significant stress in sectors like textiles and jewelry, while India works on policy measures to diversify and strengthen its export market. The episode also touches on India’s lagging 5G expansion and HL’s demerger of its ice cream business.

Takeaways

• 😀 India’s 2025 draft Civil Drone Promotion and Regulation Bill sparked widespread backlash from startups, hobbyists and industry groups for being more restrictive than the liberal 2021 rules.
• 😀 Drones are framed as high-impact tools across agriculture, healthcare, public safety and national security — examples include women’s self-help groups spraying crops, vaccine deliveries to remote villages, crowd surveillance in Delhi and Army UAV monitoring at border posts.
• 😀 The 2021 drone regime (trust, self-certification, non-intrusive monitoring) and green-zone/testing exemptions fuelled rapid industry growth: training schools, certified pilots, PLI incentives and local assembly after import restrictions.
• 😀 Key objections to the 2025 draft include universal registration (even toy drones), mandatory pilot licensing for hobbyists/students, and requirement of DGCA certification before manufacturing or prototyping.
• 😀 The draft also introduces criminal penalties for paperwork errors and seizure/arrestand universal mandatory third-party insurance — measures seen as criminalizing ordinary or early-stage innovation.
• 😀 Critics warn the bill would raise costs and block ‘fail fast’ R&D cycles that helped startups, college projects and component manufacturers iterate and innovate under the 2021 rules.
• 😀 There is precedent for industry pushback shaping drone policy: the restrictive UAS rules in 2021 were scrapped after heavy criticism and replaced by liberalised rules — a similar reversal may still happen.
• 😀 US tariffs introduced in August 2025 (25% plus an extra 25% on some items) immediately disrupted India–US trade: September saw a 12% y/y fall in US-bound exports and October produced a record goods trade deficit (~$42 billion).
• 😀 The tariffs caused sectoral pain: gems & jewelry exports plunged ~29.5% y/y, textiles/apparel fell ~8.34% y/y (major impact on Tirupur/Tamil Nadu clusters), engineering goods dropped ~16.7% y/y, while electronics (tariff-exempt) grew ~19% y/y.
• 😀 Macroeconomic effects include overall exports contracting ~12% y/y between May–October and an average monthly export loss of ≈$2.5 billion over five months — losses concentrated in labour-intensive MSMEs.
• 😀 RBI relief measures offered temporary liquidity support: 4-month loan payment moratorium (Sep–Dec) with simple interest and no NPA classification if accounts were regular, longer export credit tenors, and relaxed FX repatriation timing.
• 😀 The government moved to ease supply-side constraints: scrapping many Quality Control Orders (QCOs) that choked raw-material imports and announcing a Rs 25,000 crore export promotion mission with two schemes (named in the transcript as ‘Nirriat proahan’ and ‘Nirat Disha’) for financing, branding, logistics and compliance support.
• 😀 Small but notable tidbits: India’s 5G and fiber rollout is lagging due to state-level right-of-way and power tariff issues; HL plans to demerge its ice-cream business 'Quality Walls' (record date early December 2025); and Afghanistan’s trade minister Nuruin Azizi visited Delhi to deepen trade ties and use Chabahar port.

Q & A

What is the key issue with India's draft Drone Promotion and Regulation Bill of 2025?

The 2025 draft bill introduces stricter regulations compared to the 2021 drone rules. Key concerns include mandatory pilot licensing for all drone operators, universal registration for even toy drones, and requirements for full DGCA certification before manufacturing or operating drones, which stifle innovation and create burdens for startups and hobbyists.

How did India's drone industry evolve between 2014 and 2021?

Before 2021, drones were effectively banned in India, with complex regulations and bureaucratic hurdles that discouraged innovation. In 2021, the government introduced more liberal drone rules, promoting innovation through self-certification, registration exemptions for small drones, and a simplified approval process for startups and researchers. This led to rapid growth in the drone sector.

What was the impact of the 2021 drone regulations on India's drone industry?

The 2021 regulations significantly boosted India's drone industry, fostering the growth of startups, increasing the number of certified drone pilots, and attracting global manufacturers. The liberalized rules created an environment where drones could be used for diverse applications, including agriculture, healthcare, and national security.

How does the 2025 draft bill differ from the 2021 regulations in terms of drone development and innovation?

The 2025 bill is much more restrictive. It mandates universal drone registration, pilot licensing for all operators, and full certification for prototypes and new designs, which were previously allowed to be tested without such bureaucratic hurdles. This could slow down innovation and make it harder for startups and researchers to experiment with drone technologies.

What is the potential impact of the 2025 draft drone bill on small-scale drone operators and students?

The bill's requirements for universal registration and pilot licenses could create financial and administrative burdens for small-scale operators, hobbyists, and students. For example, a student working on a drone project would need a full pilot license and certification for even small prototype drones, which could deter experimentation and innovation.

How has the U.S. tariff policy affected India's exports?

The U.S. imposed 25% tariffs on Indian exports in August 2025, leading to a sharp decline in exports to the U.S. by 12% in September and 8.6% in October. This has hurt key sectors like textiles, gems and jewelry, and engineering goods. The tariffs caused significant financial strain on businesses, especially small enterprises dependent on U.S. exports.

What sectors have been most impacted by the U.S. tariffs on Indian exports?

The most affected sectors include textiles, gems and jewelry, and engineering goods. For example, the gems and jewelry sector saw exports to the U.S. fall by nearly 30%, and the textile industry faced canceled orders from major U.S. retailers, causing revenue drops of up to 50% for many exporters.

How has the Indian government responded to the economic impact of the U.S. tariffs?

In response to the tariffs, the Reserve Bank of India (RBI) introduced a relief package for affected businesses. This included deferring loan payments, offering more flexible export financing, and allowing companies to hold foreign exchange longer before repatriation. These measures aim to provide temporary financial relief while businesses adjust to the tariff impact.

What long-term strategy is the Indian government pursuing to mitigate the effects of the U.S. tariffs?

India is working on diversifying its export base, focusing on new markets, and improving the competitiveness of its exports. This includes scrapping Quality Control Orders (QCOs) on certain imports and launching export promotion schemes such as Nirriat Proahan, which provides financial support and logistics assistance to exporters.

What is the significance of the U.S. tariffs in the broader context of global trade between India and the U.S.?

The tariffs have highlighted the vulnerabilities in India’s export sector and its relative bargaining power in global trade. While China’s much larger exports to the U.S. give it greater leverage in trade negotiations, India’s smaller export base and lack of similar leverage make it more vulnerable to tariff impositions, reinforcing the need for India to improve its global competitiveness.