Context: Recenty, Prime Minister Narendra Modi-led Union Cabinet took a series of key decisions, which included the approval for amendments to the existing Foreign Direct Investment (FDI) policy on space sector.

• Under the amended FDI policy, 100% FDI is allowed in space sector. 

Background

• To date, FDI is permitted to establish and operate satellites only through the government’s approval route. 

• 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 “The liberalized entry routes under the amended policy are aimed to attract potential investors to invest in Indian companies in space".

Key Points

• According to a government statement, under the amended FDI policy, 100 per cent FDI is allowed in the space sector. 

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.

Key Benefits

• The liberalised entry routes under the amended policy are aimed to attract potential investors to invest in Indian companies in space.

• The FDI policy reform will enhance Ease of Doing Business in the country, leading to greater FDI inflows and thereby contributing to the growth of investment, income and employment.

• The proposed reforms seek to liberalize the FDI policy provisions in the space sector by prescribing liberalized entry route and providing clarity for FDI in Satellites, Launch Vehicles and associated systems or sub-systems, Creation of Spaceports for launching and receiving Spacecraft and manufacturing of space-related components and systems.

• The Indian Space Policy 2023 was cited as an overarching, composite, and dynamic framework to implement the vision for unlocking India’s potential in the space sector through enhanced private participation. 

• The 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 effectively implementing space applications among all stakeholders.

• 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.