India amends policy, allows 100% FDI in manufacture of satellite components

74% FDI has been permitted for satellite manufacturing and operation, satellite data products, and ground segments and user segments

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India on Wednesday further liberalised its space sector by amending its foreign direct investment (FDI) policy, which may pave the way for more foreign capital inflow in the fields of satellite development and launch, and creating the ground infrastructure for the same.

The policy cleared by the Union Cabinet ensures 100 per cent FDI in the manufacturing of components and systems or sub-systems for satellites, ground segments, and user segments. On the other hand, 74 per cent FDI has been permitted for satellite manufacturing and operation, satellite data products, and ground segments and user segments. Beyond 74 per cent, these activities fall under the government route. In addition, for the development of launch vehicles and associated systems, and the creation of spaceports for launching and receiving spacecraft, FDI under the automatic route has been fixed at 49 per cent.

According to the existing policy, FDI is permitted in the establishment and operation of satellites through the government approval route only. 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 liberalised FDI thresholds for various sub-sectors/activities, a government statement said.

"The proposed reforms may liberalise the FDI policy provisions in the space sector by prescribing a liberalised entry route and providing clarity for FDI in satellites, launch vehicles, and associated systems or subsystems, the creation of spaceports for launching and receiving spacecraft and manufacturing of space-related components and systems," a government statement said.

"After the pioneering initiative to administratively allocate satellite spectrum, the decision to allow a liberal FDI policy for space is yet another significant move forward. The liberal FDI limits by automatic route for end-to-end satellite manufacturing and operation, components and systems/sub-systems for satellites, satellite data products, and ground segment & user segment, launch vehicles, the creation of spaceports will boost the confidence of all space industry members, including the biggest global players in the space and satellite domain," said AK Bhatt, Director-General, Indian Space Association (ISpA).

"This will give India access to the latest technological advances and much-needed funds not only from the country but from international investors too. At present, the space sector in India accounts for little over about two per cent of the global space economy, and this move will help the country to gain a much larger pie in the global market," he added.

"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 this, companies will be able to set up their manufacturing facilities within the country duly encouraging 'Make in India' and 'Atmanirbhar Bharat' initiatives of the government," it said.