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Indian Government Contemplates Easing FDI Norms in the Space Sector to Attract Foreign Investments

The Indian government is engaged in inter-ministerial discussions aimed at further liberalizing foreign direct investment (FDI) norms in the space sector, with the goal of attracting overseas players and private companies, according to a senior government official. The official emphasized the significant potential for foreign companies to invest in India’s rapidly expanding space sector.

The proposal to relax FDI norms in the space sector is currently “under inter-ministerial discussion,” the official revealed, refraining from providing additional details.

Currently, FDI in the space sector is permitted up to 100 percent specifically in the area of satellite establishment and operations but only through government routes.

Following the successful touchdown of ISRO’s Chandrayaan-3 spacecraft near the moon’s South pole, three G-20 countries have expressed interest in exploring potential collaborations or partnerships with India in the space sector.

In April, the government approved the Indian Space Policy 2023, which aims to institutionalize private sector participation in the space industry while ISRO focuses on advancing space technologies through research and development.

The Indian Space Policy-2023 also outlines the roles and responsibilities of ISRO, the space sector PSU NewSpace India Limited (NSIL), and the Indian National Space Promotion and Authorization Center (IN-SPACe).

According to various reports, the global space economy was valued at approximately $546 billion in 2022 and is projected to reach around $1 trillion by 2040, driven by cost reductions and technological advancements.

A Deloitte-CII report notes that the Indian space economy comprises a broad value chain, starting with Research and Development (R&D) organizations and manufacturers of space hardware and ending with providers of space-enabled products and services. To encourage investment in the space sector, the report suggests that the Indian government consider tax incentives such as exemptions, holidays, or accelerated depreciation for companies involved in space sector activities.

Governments often act as initial customers for startups in the space industry, providing a sense of assurance to potential investors. The report emphasizes the need to create sustainable market demand for private startups, fostering the development of a robust private space ecosystem in India.