India approves 100% FDI in space sector

On February 22nd 2024, the Indian government amended foreign direct investment (FDI) guidelines for the strategic space sector, allowing greater overseas capital inflows across satellite manufacturing, launch vehicles building and ground infrastructure creation.

Changes in FDI Caps

• The policy cleared by the Union Cabinet ensures 100 per cent FDI in the manufacturing of components and systems or sub-systems for satellites, ground segments, and user segments.
• 74 per cent FDI has been permitted for satellite manufacturing and operation, satellite data products, and ground segments and user segments. Beyond 74 per cent, these activities fall under the government route.
• For the development of launch vehicles and associated systems, and the creation of spaceports for launching and receiving spacecraft, FDI under the automatic route has been fixed at 49 per cent.

Rationale for Liberalisation

The proposed reforms may liberalise the FDI policy provisions in the space sector by prescribing a liberalised entry route and providing clarity for FDI in satellites, launch vehicles, and associated systems or subsystems, the creation of spaceports for launching and receiving spacecraft and manufacturing of space-related components and systems.
The changes intend to introduce cutting-edge technologies in India, integrate domestic space players across value chains with global majors and meet national demands in earth observation, telemedicine, internet connectivity through swifter augmentation of space assets creation capacities.

Projected Outcomes

Industry groups estimate the reforms could quickly grow India’s 2% global space economy share by attracting substantial foreign investments. With immense market potential, recent policy boosts around private participation and reforms in various verticals, the reforms would help to generate employment, enable modern technology absorption and make the sector self-reliant. It is also expected to integrate Indian companies into global value chains. With this, companies will be able to set up their manufacturing facilities within the country.

Make in India Impetus

Eased investment ceilings also incentivise global companies to shift satellite manufacturing and testing facilities to India through joint ventures and partnerships to serve worldwide geographies while also reducing import reliance for components like sensors and batteries.

Boost to Space Startups

High risk, capital intensive space ventures face inherent challenges in raising substantial growth finances conventionally. The FDI relaxations promise immense fundraising tailwinds for Indian startups planning constellations of communication and observation satellites.

Indian Space Policy 2023

The Indian Space Policy 2023 was notified as a composite framework to implement the vision for unlocking India’s potential in Space sector through enhanced private participation.
The policy aims to augment space capabilities; develop a flourishing commercial presence in space; pursue international relations and create an ecosystem for effective implementation of space applications among all stakeholders.

Category: India Nation & States Current Affairs