Current context:
India’s new FDI policy allows for 100% foreign investment in the space sector.
About current context:
- The FDI policy change was implemented to accomplish the objective of Atmanirbhar Bharat.
- The space sector is now open to foreign direct investment in specific sub-sectors and activities.
- The FDI policy reform will improve the ease of doing business in the country, leading to larger FDI inflows and so contributing to growth of investment, income, and employment.
The Indian Space Policy 2023:
- This policy aims to improve space capabilities, establish commercial presence, drive technology development, foster international relations, and establish an ecosystem for space application implementation among stakeholders.
- it was notified as an overarching, composite, and dynamic framework to implement the vision for unlocking India’s potential in Space sector through enhanced private participation.
Benefits:
The amended FDI policy permits 100% FDI in the space sector, aiming to attract potential investors to Indian space companies through liberalized entry routes.
The entry route for the various activities under the amended policy are as follows:
1. Upto 74% under Automatic route: Over 74% of satellite manufacturing, operation, data products, ground segment, and user segment activities fall under government route.
2. Upto 49% under Automatic route: The government oversees 49% of the activities related to launch vehicles, associated systems, and creation of spaceports for launching and receiving spacecraft.
3. Upto 100% under Automatic route: Manufacturing of components and systems/ sub-systems for satellites, ground segment and user segment.
What is FDI?
- Foreign Direct Investment (FDI) involves foreign companies operating and controlling businesses in India, distinct from portfolio investment, which involves buying Indian stocks.
Types of FDI:
- Horizontal FDI: A business expands its operations to another country, undertaking the same activities.
- Vertical FDI: A business moves to a different level of the supply chain in another country, engaging in related activities.
- Conglomerate FDI: Unrelated business activities are undertaken in a foreign country (less common due to market penetration challenges).
Routes for FDI in India:
- Automatic Route: The Automatic Route allows non-resident investors or Indian companies to invest without requiring government approval from the Indian government.
- Government Route: The Government Route requires approval from the Government of India before investment, and proposals for foreign direct investment are evaluated by the respective Administrative Ministry/Department.
Recent activities in FDI:
- Top 5 sectors receiving highest FDI Equity Inflow IN FY 2022-23’s services sector, including finance, banking, insurance, outsourcing, R&D, courier, tech testing, analysis, other, computer software & hardware, trading, telecommunications, and automobile industry.
- Top 5 States receiving highest FDI Equity Inflow during FY 2022-23 are Maharashtra (29%), Karnataka (24%), Gujarat (17%), Delhi (13%), and Tamil Nadu (5%)
Conclusion:
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 (MII)’ and ‘Atmanirbhar Bharat’ initiatives of the Government.