The Union Cabinet approves a groundbreaking amendment to India’s FDI policy, enabling up to 100% FDI in specific space activities. A pivotal move towards self-reliance and ‘Make in India,’ this policy change would elevate private participation in Indian entities engaged in space-related activities and India’s standing in the global space economy. This note captures the critical policy change and its potential to drive increased private participation in the Indian space program.
Overview
On February 21, 2024, the Union Cabinet approved a proposed amendment to the foreign direct investment (FDI) policy concerning the Indian space sector. The reform allows up to 100% FDI in three distinct categories of activities in the space sector, all under the ‘Automatic’ entry route. Before this amendment, 100% FDI was permitted only under the ‘Government’ entry route for satellite establishment and operations, subject to the sectoral guidelines of the Indian Space Research Organization (ISRO) and the Department of Space.
Background
The changes to the FDI policy align with the Indian Space Policy 2023, formulated by ISRO and the Indian National Space Promotion & Authorization Centre (IN-SPACe). Approved by the Union Cabinet in May 2023, the Indian Space Policy envisions enhancing India’s space capabilities and establishing India’s commercial presence in the space sector.
Key Highlights of the Amendment
| S. No. | Activity | FDI Cap (%) | Entry Route |
| (1) | Satellites-Manufacturing & Operation, Satellite Data Products and Ground Segment & User Segment | 74% | Automatic (Government Route beyond 74%) |
| (2) | Launch Vehicles and associated systems or subsystems, Creation of Spaceports for launching and receiving Spacecraft | 49% | Automatic (Government Route beyond 49%) |
| (3) | Manufacturing of components and systems/subsystems for satellites, ground segment, and user segment | 100% | Automatic |
Impact and Potential Implications
The proposed reform aims to liberalize FDI provisions by introducing more accessible entry routes and clarifying FDI in various space-related activities. This policy change aligns with the vision of the Indian Space Policy, and the proposed liberalization introduces a convenient entry mechanism for FDI in the Indian space sector. Accordingly, this policy reform is expected to make the Indian space sector more attractive for FDI, facilitating technological advancement and enabling Indian space companies to scale up operations and set benchmarks in the global space economy.
Following this press release, stocks of Indian space companies such as Paras Defence and Space Technologies, MTAR Technologies, Taneja Aerospace and Aviation, and Apollo Micro Systems have already witnessed a spike of up to 5% on February 22, 2024. Therefore, this strategic move by the Indian government is also being welcomed by the stock market as it would not only increase private sector involvement in the Indian space industry but also has the potential to boost employment generation substantially, fostering the philosophy of self-reliance (‘Atmanirbhar Bharat’) and the tenets of the ‘Make in India’ initiative.
However, the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, are yet to be amended to give effect to this policy decision.