Liberalised FDI Norms, Gaganyaan To Add Boosters To Indian Space-Tech’s Upward Flight

Following the successful launch of Chandrayaan-3 and Aditya L-1 probes, the liberalisation of foreign direct investment (FDI) norms in the space sector, announced by the Union Cabinet on 21 February couldn’t have come at a more opportune time. 

The revisions seeking to make the country’s space sector a lucrative proposition for global investors are expected to get a further boost, with the announcement of the names of four astronauts for the country’s Gaganyaan crewed mission in outer space and commitment to establish a space station by 2035. Their impact on India may be similar to that of the Apollo moon missions, in making the US a major spacefaring nation. 

 “Per the old FDI norms, the approval process was lengthy as nothing was allowed under the automatic route. Now under the limits specified in the policy, you can bring in money without formal government approval,” Pawan Goenka, Chairman of the Indian National Space Promotion and Authorisation Centre (IN-SPACe), the single window nodal agency for authorising, promoting and regulating private players in the space sector, tells Swarajya. 

Under the automatic route, 49 per cent FDI is permitted in launch vehicles and associated systems or subsystems and the creation of spaceports and up to 74 per cent under the automatic route in satellite manufacturing and operation, satellite data products and ground and user segments.

FDI beyond the stipulated limits in the two categories will be through the government route.

This especially benefits over 200 Indian startups working in different areas of space-tech, including building launch vehicles or rockets, designing satellites and space situational awareness systems and space-based applications such as mining and farming.

Pawan Kumar Chandana, Co-founder and CEO of launch vehicle-maker Skyroot Aerospace, says new investments and the setting up of a space station will be a logical corollary to the success of the Gaganyaan mission that will be critical to making the country aatmanirbhar (self-reliant) in human spaceflight. 

“These capabilities are much needed to further push India’s position as a global space power to acquire a significant share of the global space economy.”

“Till now investments could only be done by Indian investors but with the easing of FDI norms spacetech startups and the industry will have a larger pool of investors to tap into. This will help build momentum,” adds Suyash Singh, Co-founder and CEO of the satellite manufacturing startup GalaxEye, which is currently working on the world’s first hybrid sensor-imaging satellite.

ISRO’s Vibrant Vendor Ecosystem

But the country also hosts over 400 private companies that are part of the vendor ecosystem, which the national space agency Indian Space Research Organisation has nurtured since its founding in 1969 to service its components, materials, and fabrication requirements. 

The list, which includes names such as Larsen and Toubro, Tata Consulting Engineers, Walchandnagar Industries, Ananth Technologies and Alpha Design Technologies, also stands to benefit immensely.

“Many large companies are looking to establish joint ventures with similar companies overseas for not just Indian applications but also global applications. We expect that most of these companies would be active in the areas of satellite operations, satellite manufacturing and ground stations,” informs IN-SPACe’s Goenka.

In 2022, a HAL-L&T consortium bagged a Rs 860 crore deal from New Space India Ltd to build five Polar Satellite Launch Vehicle rockets, also described as India's workhorse for sending missions in outer space.

“It signals a new era of growth and opportunity, not just for the Indian space industry but also for global stakeholders looking to participate in the country’s burgeoning space economy.”

Sustained Growth

Despite the prolonged funding winter being faced by startups, India’s space technology industry has continued expanding at a remarkable pace. 

In the current fiscal, space-tech startups have so far raised $124.7 million compared to $112 million in 2022, a growth of over 11 per cent, per data compiled by IN-SPACe and Swarajya. 

Simultaneously, the country’s current space market is valued at around $8 billion, growing at a CAGR of 4 per cent in the past few years compared to 2 per cent globally, according to a report by global consultancy Arthur D Little.

And this is expected to receive a tremendous boost.

“Earlier, we were struggling to build collaborative relationships with several nations because of certain gaps that the government has now bridged. We will now be able to partner on exports and technology transfers with friendly nations to further enhance our bilateral relationships,” opines Brajesh Singh, Country President at Arthur D Little.

Moreover, 100 per cent FDI is permitted under the automatic route for manufacturing components and systems and sub-systems for satellites, ground and user segments. 

“If a foreign company wants to set up a wholly-owned subsidiary without an Indian partner, we will be allowing that for making subsystems and components under the automatic route,” says Goenka, adding, “Setting up a 100 per cent subsidiary also becomes attractive because at times companies may not want a local partner.”

Other than providing Indian space-tech companies easier access to the latest technologies and large international funding, the liberalised FDI regime will also help increase India’s share in the global industry.

“Currently, the space sector in India accounts for little over about 2 per cent of the global space economy and this move will help the country to gain a much larger pie in the global market,” points out Lt. Gen (Retd) Anil Kumar Bhatt of the apex industry association Indian Space Association.

The country’s space industry was earlier projected to grow to $40 billion by 2040, at a CAGR of 9.2 per cent, to reach a 4 per cent market share globally. But experts like Arthur D Little’s Singh feel that India can do far better to touch $100 billion to corner a 10 per cent market share.

And the recent developments may well prove to be a first leap in that direction.