Private participation

The space sector has opportunities for India

Prime Minister Narendra Modi on Tuesday revealed the names of four astronauts who have been selected for the Gaganyaan mission. This came shortly after the Union Cabinet’s decision to approve 100 per cent foreign direct investment (FDI) in the space sector to enhance activity. The recent amendment to the FDI policy is in line with the vision and strategy outlined in the Indian Space Policy 2023. According to the recent decision, firms in satellite manufacturing and operation, satellite data products and ground segment, and user segment can get FDI up to 74 per cent under the automatic route. For the sub-sector comprising launch vehicles and associated systems, and the creation of spaceports for launching and receiving spacecraft can get FDI  up to 49 per cent through automatic routes. At the same time, 100 per cent FDI under the automatic route has now been permitted for manufacturing components and systems/subsystems for satellites.

Having garnered a reputation for its cost competitiveness, India’s space economy is worth $8 billion, a meagre 2 per cent of the global space economy. Yet, the remarkable feats achieved by the country in space exploration, from landing on the moon’s south pole to the liftoff of a satellite with the first indigenously built cryogenic engine, far outweigh its modest space spending. The country’s space programme for the future is ambitious and it includes plans to launch a space station by 2035. Military and security imperatives have also gained greater prominence in thinking about space utilisation. Such elevated space ambitions call for greater financing needs and enhanced research and innovation in the sector. In the Interim Budget this year, the central government allocated Rs 13,042.75 crore to the Department of Space, as against Rs 12,543.91 crore in 2023-24. Given the other demands on the Budget, India’s space sector must attract private-sector investment. In this context, the government launched NewSpace India Ltd in 2019 to produce, assemble, and integrate launch vehicles with involvement from private players, and the Indian Space Association in 2021 to open up the Indian space industry to private companies and startups. Already, around 190 startups are working in this area.

At a broader level, the Indian Space Policy does well to allow the Indian Space Research Organisation to primarily focus on research and development while promoting greater private sector participation in the entire value chain, and also opening up the sector for foreign investment. Aside from increasing India’s share in the global space economy, increased activity in the sector can have several spinoff benefits. It can potentially come up with innovative solutions in areas such as telecommunication, agriculture, climate change, and disaster management. Increased private-sector participation in the country’s space sector has competitive advantages because of the availability of engineering talent at low cost. Some industrial clusters have already been established, such as the Salem aerospace cluster in Tamil Nadu and the Belagavi aerospace cluster in Karnataka. Increasing the level and ease of FDI in the sector should address its financing needs. Given the focus on technology and global interest in space, in general, India has the opportunity to increase the scale of activity, which can lead to multiple benefits.