India’s New Space Sector Reforms Open Door to Foreign Investments

The updated FDI policy allows 100% foreign investment in various sub-sectors and activities through the automatic route, fostering a more inclusive environment for foreign investments

March 1, 2024

The policy permits 100% FDI for manufacturing components, systems, or sub-systems related to satellites, ground segments, and user segments

India's move aligns with global trends in space sector privatisation and collaboration, positioning the country as a competitive player alongside the US, the European Union, and China

This move is anticipated to catalyse the growth of India’s space economy, currently valued at US$8.4 billion, with an ambitious target of reaching US$44 billion by 2033

Establishing the Indian National Space Promotion and Authorization Centre (IN-SPACe) as an autonomous nodal agency underscores India’s commitment to facilitating private sector engagement

The recent endorsement by the Union Cabinet of India to permit up to 100% foreign direct investment (FDI) in its space sector signifies a crucial shift towards liberalisation in an area that has long been tightly regulated. This strategic decision aims to reduce entry barriers for foreign players, fostering a more inclusive environment for international investments, technology transfers, and collaborative research in space technology.

The revised FDI policy in the space sector allows for 100% foreign investment through the automatic route in various sub-sectors and activities. This significantly differs from the previous stance, where FDI in satellite establishments and operations required government approval. The policy change aligns with the terms of the Indian Space Policy 2023, promoting a liberalised approach across different facets of the space sector, including:

  • Manufacturing of Components and Systems: 100% FDI is permitted via the automatic route for manufacturing components, systems, or sub-systems related to satellites, ground segments, and user segments.
  • Satellite Manufacturing and Operation: FDI up to 74% is allowed under the automatic route, with anything exceeding this limit requiring government approval.
  • Launch Vehicles and Spaceports: Up to 49% FDI is allowed under the automatic route, while anything beyond this threshold requires government approval.

Globally, the space sector is experiencing increased privatisation and international collaboration. Countries like the US, through entities such as NASA, have long encouraged private investments in space exploration and satellite deployment. Similarly, the European Union and China have been making strides in liberalising their space sectors to foster innovation and reduce dependence on government funding. India’s policy change aligns with these global trends, positioning it as a competitive player on the international stage.

The amendments in the FDI policy are expected to catalyse the growth of India’s space economy, valued at approximately US$8.4 billion in 2023, accounting for 2-3% of the global space industry. With an ambitious target of reaching US$44 billion by 2033, the Indian space sector is on track to claim a significant stake in the global space economy. This expansion is supported by a notable increase in space start-ups from one in 2014 to 189 in 2023, accompanied by a surge in investments to US$124.7 million in 2023.

Liberalising FDI in the space sector is not merely an economic move but a strategic one, aligning India with global privatisation trends and international collaboration witnessed in countries like the US, the European Union, and China.

The establishment of IN-SPACe as an autonomous nodal agency underscores India’s commitment to facilitating private sector engagement in space activities. IN-SPACe bridges ISRO and the commercial sector and is mandated to encourage, authorise, and supervise private sector space undertakings. To date, IN-SPACe has signed 45 Memorandums of Understanding (MOUs) with non-governmental entities, paving the way for an inclusive growth model in the space sector.

The Indian Space Policy 2023 and the liberalised FDI policy have laid the foundation for a dynamic and inclusive space sector. This framework aims to enhance space capabilities, stimulate commercial presence, and leverage space technology for development. India is poised to boost its technological prowess and economic footprint in the global space industry by encouraging greater private-sector involvement and facilitating international partnerships.

The strategic shift towards a more open FDI regime in the space sector heralds a new era of growth, innovation, and collaboration. With the right balance of regulatory oversight and market freedom, India’s space economy will soar, contributing significantly to the global space community and reinforcing its position as a leading space-faring nation.

India’s decision to liberalise FDI in the space sector is a forward-looking move promising to unlock new growth avenues, drive technological advancement, and position India as a significant player in the global space economy. As the country prepares to welcome foreign investments, the focus on creating a supportive ecosystem will be paramount in realising the full potential of this policy change. The journey ahead is challenging and promising, with the potential to catalyse a new era of space exploration and innovation in India.

Source: Hindu Business Line

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