GS Paper III

News Excerpt:

Recently, the Union Cabinet chaired by the Prime Minister has approved an amendment in the Foreign Direct Investment (FDI) policy on the space sector.

Amendment in FDI Policy:

• Currently, FDI is permitted only in the establishment and operation of Satellites through the Government approval route.  
• In line with the vision and strategy under the Indian Space Policy 2023, the Union Cabinet has eased the FDI policy on the Space sector by prescribing liberalized FDI thresholds for various sub-sectors/activities.

• 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 the following:
• Satellites, Launch Vehicles and associated systems or subsystems.
• Creation of Spaceports for launching and receiving Spacecraft.
• Manufacturing of space-related components and systems.
• With increased investment, internal stakeholders like IN-SPACe, ISRO and NSIL would be able to achieve the sophistication of products, global scale of operations and enhanced share of the global space economy.

Benefits under the amended FDI Policy:

• Under the amended FDI policy, 100% FDI is allowed in the space sector. 
• The liberalized entry routes under the amended policy are aimed at attracting potential investors to invest in Indian companies in space.
• Now, the satellite sub-sector has been divided into three different activities with defined limits for foreign investment in each such sector:
• Upto 74% under Automatic route: Satellites-Manufacturing & Operation, Satellite Data Products and Ground Segment & User Segment. Beyond 74%, these activities are under the 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 the 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 these amendments, companies will be able to set up their manufacturing facilities within the country, thus encouraging 'Make In India (MII)' and 'Atmanirbhar Bharat' initiatives of the Government.

Current status of the Indian Space industry:

• At present, the Indian space economy is valued at around ₹6,700 crore ($8.4 billion) with a 2% share in the global space economy.

• As per IN-SPACe’s projection, India’s space economy has the potential to reach ₹35,200 crores ($44 billion) by 2033 with about 8% of the global share.

• At present, the share of the domestic market is ₹6,400 crore ($8.1 billion). The export market share is ₹2,400 crore ($0.3 billion). The aim is to increase the domestic share to ₹26,400 crore ($33 billion), and the export share to ₹88,000 crore ($11 billion).
• Besides, an investment of ₹17,600 crore ($22 billion) is envisioned for the next 10 years in the industry. 

Conclusion:

The liberalization of FDI policy in the Indian space sector is a strategic move aligning with the Indian Space Policy 2023. With 100% FDI allowed, the reforms aim to boost private sector participation, technology development, and economic growth, positioning India as a key player in the global space economy.