FDI IN SPACE SECTOR (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     22nd February 2024        
output themes

Context: The Centre has approved an amendment in the Foreign Direct Investment, FDI policy, allowing 100% foreign investment in the space sector. 


Foreign Direct Investment

  • About: FDI is the investment through capital instruments by a person resident outside India (a) in an unlisted Indian company; or (b) in 10% or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company.
  • Examples: - It includes foreign currency convertible bond, certain foreign institutional investment, 
  • Control: Investors gain substantial control and influence over the management and decision-making processes of the foreign business.
  • objective: FDI is often associated with strategic objectives, such as expanding operations or accessing new markets.
  • Regulatory body:  Reserve Bank of India (RBI) and finance ministry.
  • Prohibited items:  Atomic Energy Generation, Nidhi Company, Lotteries (online, private, government, etc.), Investment in Chit Funds, Trading in TDR’s Any Gambling or Betting businesses, Cigars, Cigarettes, or any Housing and Real Estate (except townships, commercial projects, etc.).
  • Special case: - An entity of a country, which shares a land border with India, can invest only under the Government route.
  • Government policies:  under two routes- (1) Automatic route (2) through government approval. Liberalisation of FDI norms.
  • Trend in FDI: - In the fiscal year 2022–23, FDI stood at $71.3 billion, which marked a 16 percent decrease compared to the previous fiscal year (2021–22). however there has been a general increase in FDI in the past decade.

Space Sector In India

  • ISRO is the 6th largest space agency in the world and holds an exceptional success rate
  • Rank 5: With over 400 private space companies, India ranks fifth globally in no. of space companies.
  • Growth Projections: India currently contributes 2-3% to the global space economy. However, projections suggest that it aims to expand its share to over 10% by 2030, signifying significant growth potential.
  • Amendments to Private Sector Participation: The government's amendments aim to bolster private sector involvement, leading to increased employment opportunities, technological advancements, and self-reliance within the sector. 
  • Vision for the Future: With the recent liberalization of the space sector, India envisions a robust $40 billion space economy by 2040.
  • Indian Space Policy 2023: This Policy  aims to augment space capabilities, foster commercial presence in space, drive technology development, facilitate international relations, and create an ecosystem for effective space application implementation.
Samadhaan