The Indian government has approved a major amendment in the foreign direct investment (FDI) policy on space sector, allowing up to 100% FDI in various sub-sectors and activities. The move is aimed to realize the vision of an Atmanirbhar Bharat (self-reliant India) as laid down by Prime Minister Narendra Modi.
The amendment, announced on 21 February 2024 by the Press Information Bureau (PIB), is in line with the Indian Space Policy 2023, which was notified as a comprehensive and dynamic framework to unlock India’s potential in space sector through enhanced private participation.
The policy seeks to augment space capabilities, develop a flourishing commercial presence in space, use space as a driver of technology development and derived benefits in allied areas, pursue international relations and create an ecosystem for effective implementation of space applications among all stakeholders.
The FDI policy reform will enhance ease of doing business in the country, leading to greater FDI inflows and thereby contributing to growth of investment, income and employment.
Liberalized FDI thresholds for space sub-sectors
As per the existing FDI policy, FDI is permitted in establishment and operation of satellites through the government approval route only. However, under the amended policy, the satellites sub-sector has been divided into three different activities with defined limits for foreign investment in each such sector.
The amended policy also provides clarity for FDI in launch vehicles and associated systems or subsystems, creation of spaceports for launching and receiving spacecraft and manufacturing of space related components and systems.
The entry route for the various activities under the amended policy are as follows:
- Upto 74% under automatic route: Satellites-Manufacturing & Operation, Satellite Data Products and Ground Segment & User Segment. Beyond 74% these activities are under government route.
- Upto 49% under automatic route: Launch Vehicles and associated systems or subsystems, Creation of Spaceports for launching and receiving Spacecraft. Beyond 49% these activities are under government route.
- Upto 100% under automatic route: Manufacturing of components and systems/ sub-systems for satellites, ground segment and user segment.
Benefits of FDI policy amendment
The FDI policy amendment is expected to have multiple benefits for the Indian space sector and the economy as a whole. Some of the benefits are:
- Increased private sector participation: The liberalized FDI policy will attract potential investors to invest in Indian companies in space sector, which will help them to scale up their operations, improve their products and services, and compete in the global market. This will also create more opportunities for collaboration and innovation between public and private entities in the space domain.
- Employment generation: The FDI policy reform will create more jobs in the space sector, both directly and indirectly, as more companies will set up their manufacturing facilities, research and development centers, and service delivery platforms within the country. This will also boost the skill development and human resource capacity in the space sector.
- Technology absorption and self-reliance: The FDI policy amendment will enable the Indian space sector to access and adopt modern technologies, best practices, and standards from the global space industry. This will enhance the quality and efficiency of the space products and services, and also reduce the dependence on foreign suppliers and providers. This will also foster the spirit of ‘Make In India’ and ‘Atmanirbhar Bharat’ initiatives of the government.
- Global value chain integration: The FDI policy reform will help the Indian space sector to integrate into the global value chain, which will increase its visibility, credibility, and competitiveness in the international market. This will also open up new avenues for export and import of space products and services, and also for cooperation and partnership with other countries and organizations in the space domain.
The FDI policy amendment on space sector is a bold and progressive step by the Indian government to unleash the potential of the space sector and make it a key contributor to the national development and security. It is also a reflection of the government’s commitment to make India a leading space-faring nation and a hub for space innovation and entrepreneurship.
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