Finance Ministry Notifies Amended FDI Rules For Spacetech Sector

The finance ministry has notified the liberalised foreign direct investment (FDI) regime for the space sector to help startups and companies in the space attract investments. 

“The investee entity shall be subject to sectoral guidelines as issued by the Department of Space from time to time,” the finance ministry’s notification said, adding that the amended rules would come into force on the date of the publication of the official gazette (April 16).

The move is part of the Centre’s efforts to enable spacetech startups to get access to funding needed for research and development and launching their products and services.

As part of this, the Union Cabinet, in February, approved 100% FDI via the automatic route for certain segments within the space sector, which was a long-standing demand.

As per the new rules, up to 74% FDI is allowed through the automatic route for satellite data products and ground segment and user segment. Beyond 74%, FDI in these sectors would require government approval.

Further up to 49% FDI through the automatic route is permitted for creation of spaceports for launching and receiving spacecraft and launch vehicles and associated systems or subsystems. Beyond this, government’s nod would be required.

Under the amended policy, up to 100% FDI under the automatic route is allowed for manufacturing components and systems/sub-systems for satellites, ground and user segments. 

Previously, 100% FDI was only permitted for establishment and operation of satellites.

Earlier, industry leaders told Inc42 that the government’s decision to open up more subsectors for receiving FDI would not only reduce waiting time but also improve the ease of doing business for young spacetech startups.

The latest development comes at a time when India has made great strides in the space sector. Last year, India became the first country to successfully land a spacecraft near the Moon’s south pole.

India is also the first country ever to reach the Martian orbit on its maiden attempt. As of last year, India had executed 44 spacecraft missions, 42 launch vehicle missions and five technology demonstrators.

Meanwhile, the country’s private spacetech sector has also grown by leaps and bounds since the Centre opened the space for private players in 2020.

India is currently home to over 150 spacetech startups which have raised over $285 Mn in funding since 2016. 

According to Inc42’s ‘Indian Spacetech Startup Landscape & Market Opportunity Report 2023’, the Indian spacetech industry was valued at around $15 Bn in 2023 and projected to zoom to $77 Bn by 2030.