The Foreign Direct Investment (FDI) policy for the space industry was amended and approved by the Union Cabinet, which is led by Prime Minister Shri Narendra Modi. The satellites sub-sector is now separated into three main activities, each with its own set of foreign investment boundaries.
The Indian Space Policy 2023 was notified as an overarching, composite and dynamic framework to implement the vision for unlocking India’s potential in Space sector through enhanced private participation.
The said policy aims 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.
As per the existing FDI policy, FDI is permitted in establishment and operation of Satellites through the Government approval route only. In line with the vision and strategy under the Indian Space Policy 2023, the Union Cabinet has eased the FDI policy on Space sector by prescribing liberalized FDI thresholds for various sub-sectors/activities.
Department of Space consulted with internal stakeholders like IN-SPACe, ISRO and NSIL as well as several industrial stakeholders. NGEs have developed capabilities and expertise in the areas of satellites and launch vehicles. With increased investment, they would be able to achieve sophistication of products, global scale of operations and enhanced share of global space economy.
The proposed reforms seek to liberalize the FDI policy provisions in space sector by prescribing liberalized entry route and providing clarity for FDI in Satellites, Launch Vehicles and associated systems or subsystems, Creation of Spaceports for launching and receiving Spacecraft and manufacturing of space related components and systems.
Benefits:
Under the amended FDI policy, 100% FDI is allowed in space sector. The liberalized entry routes under the amended policy are aimed to attract potential investors to invest in Indian companies in space.
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.
This increased private sector participation would help to generate employment, enable modern technology absorption and make the sector self-reliant. It is expected to integrate Indian companies into global value chains. With this, companies will be able to set up their manufacturing facilities within the country duly encouraging ‘Make In India (MII)’ and ‘Atmanirbhar Bharat’ initiatives of the Government.
What is Foreign Direct Investment (FDI) ?
FDI stands for Foreign Direct Investment. It refers to when a company or individual from one country makes an investment in a business or assets in another country. This investment typically involves a significant level of ownership control, meaning the investor has a substantial say in the management and operations of the foreign business. FDI is an essential element of globalization and can bring benefits such as increased capital flows, technology transfer, job creation, and economic growth in both the investing and recipient countries.
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