FDI in India’s Space Sector

GS-3 Mains : Economy 
Short Notes or Revision Notes 

Question : Discuss the significance of the recent Finance Ministry notification allowing FDI in India’s space sector, highlighting its potential impact on the country’s space industry growth and global competitiveness.

Context

• Recent Finance Ministry notification allows FDI in the space sector under FEMA.

India and Space Sector

• Indian Space Economy: ~$8.4 billion (2-3% of global market)
• Aiming for five-fold increase in global launch market share.
• Budgetary Allocation (2024-25): ₹13,043 crore (4% hike from previous year)
• Expected Space Economy by 2033: $44 billion
• Space Start-Ups: Grew from 1 (2014) to 189 (2023)
• Investment in Space Start-Ups: $124.7 Million (2023)

Key Initiatives

• Indian Space Policy 2023:
  • Defined roles for ISRO, NSIL, and private entities.
  • Aims to increase participation from research, academia, startups, and industry.
• Strategic Proposals by SIA: Requested substantial budget increase for:
  • Expanding space program.
  • Fostering private sector involvement.
  • Technological advancements.
  • Global space ecosystem participation.
• Tax Incentives: Needed for companies in space activities.

FDI in Space Sector

• New rules provide a liberalized entry route for FDI in:
  • Satellites (manufacturing & operation)
  • Launch vehicles
  • Spaceports
  • Space-related components/systems manufacturing
• 100% FDI allowed for:
  • Manufacturing/operating satellites
  • Satellite data products
  • Ground & user segments (up to 74% automatic route)

Significance of FDI

• Private Sector Participation:
  • Increased commercial applications of space technology.
  • Integration of Indian companies into global value chains.
• Space Missions: Strengthen India’s position as a reliable & cost-effective provider.
• Technology Absorption & Integration:
  • Modern technology advancements.
  • Achieve global scale of operations.
  • Increased share of global space economy.
• Boost Manufacturing: Encourage ‘Make in India’ initiative.
• Ease of Doing Business: Attract more FDI for growth.
• Promote Research & Innovation: Facilitate technology transfer.

Concerns and Challenges

• Limited Investor Interest: Especially in later development stages (high risk, long-term return).
• Talent Pool: Need for more skilled space technology professionals.
• Policy Clarity: More clarity needed to attract foreign investors.
• Simplifying FDI Process: Complex procedures deter potential investors.
• Capital-Intensive Requirements: Challenge for startups and smaller companies.
• Conflict with ISRO: Investor apprehension due to government monopoly and potential competition with ISRO.

Conclusion

• Liberalized FDI policy is a strategic move to attract foreign collaboration and investment.
• This will revolutionize the Indian space industry and accelerate India’s journey as a global space power.