Context: 

The Union Cabinet has approved the amendment in Foreign Direct Investment (FDI) policy on the space sector.

Indian Government Approves 100% FDI in Space Sector

• Existing Policy: As per the existing FDI policy, FDI is permitted to establish and operate Satellites through the Government approval route only.
• Indian Space Policy 2023: In line with the vision and strategy under the Indian Space Policy 2023, the Cabinet has eased the FDI policy on the Space sector.
• Liberalized FDI Thresholds: The satellite sub-sector has been divided into three different categories with defined limits for foreign investment in each such sector
• Impact on Non-Government Entities (NGEs): This policy shift is expected to enhance NGEs’ capabilities in satellite and launch vehicle domains, promoting product sophistication and global market presence.

Amendments in the FDI Policy

• Clarity in Policy: The amendments  prescribing liberalised 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.
• Categorization and Liberalisation of FDI: The amendment provides for three categories of liberalised entry route. 
  • 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 government route.
  • Upto 100% under Automatic route: Manufacturing of components and systems/ sub-systems for satellites, ground segment and user segment.

Benefits of Liberalising FDI in Space Sector

• Attract Potential Investors: The liberalized entry routes under the amended policy are aimed to attract potential investors to invest in Indian companies in space
• Enhance Ease of Doing Business (EoDB): The FDI policy reform will enhance EoDB in the country, leading to greater FDI inflows and contributing to the growth of investment and income.
• Increased Share in the Global Market: It could steer India to capture a larger chunk of the global space market. Currently, it accounts for only around 2 percent of the international commercial market.
• Employment Generation: Increased investment and growth of the space sector would result in growth of employment in the country. Currently the sector employs only around 50000 people. 
• Absorption of Modern Technology: The sector with increased FDI and collaboration with the private sector would absorb global technologies and make the sector self-reliant.
• Integration with Global Supply Chain: Liberalized FDI would integrate Indian companies into global value chains, enabling companies to set up their manufacturing facilities within the country, thus encouraging ‘Make In India (MII)‘ and ‘Atmanirbhar Bharat‘ initiatives.

Source: PIB