OPENING UP

New FDI regime fits with India’s growing stature as space-faring nation. Market freedom requires regulatory oversight

THE GOVERNMENT MAY have timed the notification of its liberalised foreign direct investment (FDI) rules with the visit of US tech mogul Elon Musk next week. But the policy, approved by the Union Cabinet in February, is also of a piece with its drive to position India as a space power. It allows 74 per cent FDI under the automatic route for satellite manufacturing and data products, 49 per cent for launch vehicles and spaceports, and up to 100 per cent for manufacturing components required by the sector. The liberalised regime fits in with the changing profile of the country’s space programme. Largely known in the past for excellent communication and weather-related satellites, India’s stock as a space-faring nation has gone up globally since the launch of Chandrayaan last year and the setting up of the solar laboratory in January. ISRO also has plans to send astronauts into space next year. These missions signal the expanding capacities of the premier space agency. But in recent years, private companies have also made their presence felt in the arena. In 2022, for instance, Skyroot Aerospace, a Hyderabad-based exploration start-up, launched India’s first privately built and designed rocket from ISRO’S Satish Dhawan Space Centre. Space missions have so far been, by and large, driven by the thrust of successive governments on self-reliance. The new policy sends the welcome signal that the Centre today recognises the significance of collaborations in a field that is capital and technology-intensive.

India’s share of the global space economy is between 2 and 3 per cent. The government has plans to increase it to more than 10 per cent by 2030. According to the Indian National Space Promotion and Authorisation Centre (IN-SPACE), an autonomous agency of the Department of Science, this scale-up will require an investment of $22 billion in the next 10 years. The Space Policy introduced in April last year recognised this need. It redefined ISRO’S role and tasked the agency with research and development. The policy also recognised the private sector as an important stakeholder. Relaxing entry barriers for FDI is a continuation of the thrust on capturing a large share of the global space economy. It also provides regulatory clarity. Take, for instance, the provision relating to spaceports. Currently, ISRO operates the spaceports in the country. By allowing 49 per cent FDI in the segment, the government seems to be signalling its intent to make the ecosystem more enabling for private companies.

Space technology remains crucial to the welfare objectives of the government, including those related to agriculture and global warming mitigation. It cannot also be delinked from national security objectives. It’s clear that the Isro-dominated ecosystem is now a thing of the past. India’s space economy now needs the right balance of regulatory oversight and market freedom. A liberal FDI regime is the first step.