Liberalising FDI Policy To Boost Space Sector Growth, Global Integration

The Union Cabinet approved the amendment in the Foreign Direct Investment (FDI) policy on the space sector on Wednesday. As per the policy, the satellite sub-sector has been divided into three different activities with defined limits for foreign investment in each such sector.

Under the amended FDI policy, 100 per cent FDI is allowed in the space sector. The liberalised entry routes under the amended policy are aimed at attracting potential investors to invest in Indian companies in space.

Up to 74 per cent, FDI will be allowed under the automatic route in satellite manufacturing and operation, satellite data products and ground segment and user segment.

Launch vehicles and accompanying equipment or subsystems, as well as the development of spaceports for launching and receiving spacecraft, can account for up to 49 per cent under the Automatic route. More than 49 per cent of these activities are typically carried out by governments.

Components and systems/subsystems for satellites, ground segments and user segments can utilise up to 100 per cent FDI through the automatic route.

Dr Pawan Goenka, Chairman of IN-SPACe, said that the opening up of Foreign Direct Investment in the Indian space sector will boost the participation of non-governmental entities (NGEs) in space research and manufacturing by opening the doors for massive investment and global collaboration.

It is estimated that the global space industry will generate over USD one trillion in revenue in 2040. India is well-equipped with talent and infrastructure backed by enabling policies to seize this opportunity.

This amendment will empower NGEs to develop cutting-edge products, expand their global presence and grab a significant share of the booming global space economy, Goenka added.

“This policy change will give India, access to the latest tech advances and much-needed funds. At current, the space sector in India accounts for little over about two per cent of the global space economy and this move will help the country to gain a much larger pie in the global market,” Director General of Indian Space Association, Lt Gen AK Bhatt (Retd) said.

The government believes that the steps taken to liberalise the FDI policy will lead to increased private sector participation, helping to generate employment, enabling the absorption of modern technology, and making the sector self-reliant. It is also expected to integrate Indian companies into global value chains.

Previously, the Indian Space Policy 2023 was notified to enhance space capabilities, develop a commercial presence in space, use space as a driver of technological development, and reap benefits in allied areas. The policy aims to pursue international relations and create an ecosystem for the effective implementation of space applications among all stakeholders.

Apart from India, several countries have allowed FDI in their space sector to varying degrees, including the United States, which has a long history of permitting foreign investment in its space sector. Other countries allowing FDI in their space sector include Canada, UAE, New Zealand, Germany, Japan, and others.