FDI in India’s Space Sector

FDI in India’s Space Sector 

News: Recently, the Union Finance Ministry issued new regulations supporting Foreign Direct Investment (FDI) in 
the space sector under the provisions of the Foreign Exchange Management Act (FEMA). 

Highlights: 
• Indian Space Economy: The Indian space economy is estimated to be around $8.4 billion, representing approximately 2-3% of the global space economy. India aims to privatize space launches and increase its share of the global launch market by fivefold. 
• Budgetary Allocation: The Department of Space received a nominal budget increase of 4% in the Interim Union Budget for 2024-25, from ₹12,545 crore to ₹13,043 crore. The implementation of the Indian Space Policy 2023 is expected to boost the Indian space economy to $44 billion by 2033. 
• Space Start-Ups: The number of space start-ups in India has grown significantly, from 1 in 2014 to 189 in 2023 according to the DPIIT Start-Up India Portal. Investment in Indian space start-ups reached $124.7 million in 2023.

 
Key Initiatives: 
• Indian Space Policy 2023: The policy outlines roles and responsibilities for organizations like ISRO, New Space India Limited (NSIL), and private sector entities, aiming to enhance participation from research, academia, start-ups, and industry. 
• Strategic Proposals by SIA: The Space Industry Association - India (SIA-India) proposed a substantial increase in India\'s space budget for FY 2024-25 to support the expanding space program, foster private sector involvement, drive technological advancements, and enhance India\'s position in the global space ecosystem. 
• Tax Incentives: More initiatives are needed for tax exemptions, tax holidays, and accelerated depreciation for companies directly or indirectly engaged in space sector activities to encourage growth and investment. FDI in Space Sector: 
• The Finance Ministry introduced new rules under the Foreign Exchange Management Act (FEMA) to allow liberalized entry routes for Foreign Direct Investment (FDI) in satellites, launch vehicles, spaceports, and manufacturing space-related components and systems. 
• The rules allow 100% FDI in categories like manufacturing and operation of satellites, satellite data products, and ground segment and user segment. Up to 74% FDI can be done through the automatic route, with government approval required for investments beyond that. Previously, foreign investment in manufacturing and operating satellites required government approval.  
• These initiatives are aimed at attracting investments, fostering innovation, and accelerating growth in India\'s space sector, aligning with the goals outlined in the Indian Space Policy 2023 and strategic proposals from industry associations. 

Significance: 
• Private Sector Participation: The Indian space sector is transitioning from building capabilities solely under ISRO to leveraging space-based technology for commercial applications and encouraging industry involvement. This shift aims to integrate Indian companies into global value chains. 
• Space Missions: India has achieved significant milestones in space missions, gaining recognition globally for providing reliable and cost-effective space solutions. 
• Technology Absorption and Global Integration: Increased investment in the space sector will facilitate the absorption of modern technologies, allowing companies to enhance product sophistication, scale operations globally, and increase their share of the global space economy. 
• Boost Manufacturing: The policy reforms will enable companies to establish manufacturing facilities in India, aligning with the government\'s \'Make In India\' initiative. 
• Ease of Doing Business: Reforms in the FDI policy will improve the Ease of Doing Business in India, attracting higher FDI inflows and contributing to increased investment, income, and employment opportunities. 
• Promote Research and Innovations: FDI in the space sector will foster technology transfer and encourage research and innovations, driving advancements in space technology and related industries.