India’s Space Sector: Overcoming Challenges, expanding Horizons with FDI Liberalization

India’s space industry, though nascent compared to global leaders such as the US, Russia, and China, has made significant strides in cutting-edge technologies, as evidenced by successful missions like Chandrayaan-3, Aditya-L1, and XpoSat. These achievements have not only demonstrated India’s economic prowess in space technology but have also positioned the Country favourably on the global map. However, the sector faces challenges, particularly in funding.

Despite the sector’s expansion from 10 to 150 startups within three years, the absence of a substantial domestic investor pool interested in space ventures, which are inherently slow to yield returns, has hindered growth. The only other way out was to look at Foreign Direct Investment (FDI) policy. According to experts, “India stands at a critical juncture in its space journey. With strategic investments in infrastructure and manufacturing, alongside fostering innovation and education, India can achieve its goal of a US$44 billion space economy by 2033, enhancing its position as a global leader in space technology and services.”

FDI in space has been a huge topic of discussion and was on paper for quite some time. Late Wednesday evening (Feb 21, 2024), the government has announced liberalisation of FDI policy in the space sector which promises to accelerate processes from design to launch.

Views from Space Sector Startups as shared with Financial Express Online:

Sharing his views, Pawan Kumar Chandana, the Co-founder and CEO of Skyroot, says: “To allow 100 percent FDI across all domains in the space sector, gives much needed regulatory clarity for foreign investments. Satellites get a great boost with up to 74 percent FDI allowed under Automatic route for Satellites-Manufacturing & Operation, Satellite Data Products and Ground Segment & User Segment. Beyond 74 percent these activities are under government route.”

Why is it important?

According to Chandana, “In addition up to 49 percent FDI is now allowed under Automatic route for Launch Vehicles and associated systems or subsystems, creation of Spaceports for launching and receiving Spacecraft. For Skyroot being in the launch vehicle domain, 49 percent FDI in automatic route and 100 percent FDI in government route will help boost investments and open access to capital easier and at par with global standard. We believe this will get further boost with an expansion to 74 percent in the future.”

“Another major boost is up to 100 percent FDI being allowed under the automatic route for manufacturing of components and systems/ sub-systems for satellites, ground segment and user segment. This will accelerate make in India initiatives in these segments making it attractive for foreign investments and attracting global manufacturing to India.”

“Overall, the policy has come at the right time when investments in the space sector are rising exponentially, and startups are scaling to start commercial services,” he states.

Views from SpaceKidz India

“The lack of a domestic electronics ecosystem has been a significant barrier, exacerbated by the COVID-19 pandemic, which led to increased prices and import duties. The new FDI influx could enable the establishment of advanced electronic manufacturing units and local production of critical electronic components, solar cells, etc, reducing the reliance on imports,” Dr Srimathy Kesan, Founder, and CEO of SpaceKidz India says.

In her view: “India’s space startups are working on innovative projects such as green propulsion technologies, advanced communication satellites, space debris management, and spacecraft de-orbiting techniques. For these ambitions to succeed, apart from announcing 100 percent FDI for the industry, there is a strong need for extra hand holding by the government. On a suggestive note, the government, herein may be appoint “InSpace”, to play the nodal agency in promoting the capabilities of a few

“Star Startup’s”, whomsoever are working on cutting edge technologies. InSpace can thus act as a bridge facilitating connections between those startups and foreign investors, apart from hosting global investor meets exclusively for the space sector at regular intervals.”

Which areas will benefit more?

“Space education and Space tourism are two other critical allies which will flourish if there are enough funds being channelised,” she states.

IN her opinion, “To foster the space needs of Gen Alpha, India needs a “Space Research Park” offering hands-on training in satellite and rocket building, alongside facilities for simulating lunar and Martian terrains and zero-gravity experiences. Such an initiative would not only save significant funds currently spent abroad for similar training at NASA, ESA, and GCTC but also position India as a leader in space education, and a leader in space tourism in the region of SouthEast Asia, Middle East and SAARC Countries. Being a pioneer in this industry and holding an ambassador status to the top 3 research centres, I had facilitated this experience to 100s of children at Camp KSC, FLorida, and JSC Houston, ESA Brussels and GCTC Moscow. KSC and JSC have hugely benefited Indian students.”

“A good investment, Strategic planning, building a robust capacity of providing end to end satellite services, enhancing launch frequency with economical launch capabilities will play a game changer for the new spaceport at Kulasekarapattinam, Tamil Nadu,” Dr Srimathy Kesan states.

Views from Space Related Industry Bodies:

“The liberal FDI limits by automatic route for end-to-end satellite manufacturing & operation, components and systems/ sub-systems for satellites, satellite data products and ground segment & user segment, launch vehicles, creation of spaceports will boost the confidence of all space industry members, including the biggest global players in the space and satellite domain. This will give India access to the latest tech advances and much-needed funds not only from the country but from international investors too. At current, 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,” Lt Gen AK Bhatt (Retd.), Director General, Indian Space Association (ISpA).

According to Anil Prakash, DG, SIA-India, “SIA-India commends the government on the amended FDI policy in the space sector, allowing liberalized entry routes. This move is set to attract investors and boost private sector participation, particularly in satellite manufacturing, launch vehicles, and spaceports. By offering 100% automatic routes for various activities, including manufacturing components and systems, the policy aims to generate employment, promote technology absorption, and foster self-reliance. It aligns with ‘Make In India’ and ‘Atmanirbhar Bharat‘ initiatives, facilitating the integration of Indian companies into global value chains.”