India's Space Ecosystem Welcomes Foreign Investment Move, But Some Cautious

On Wednesday, the Union Cabinet approved reforms liberalising foreign direct investment policy provisions in the space sector.

India's Space Ecosystem Welcomes Foreign Investment Move, But Some Cautious

The liberalisation ranges from 49% to 100% for various subsectors of the space economy.

New Delhi:

India's burgeoning space ecosystem is praising the decision taken by Prime Minister Narendra Modi's government to open up the space sector and allow increased foreign direct investment. The move has largely been welcomed by all stakeholders, from startups to well-established players. 

While the latest FDI reform and the Space Policy of 2023 are both welcome steps, some experts say the government urgently needs to enact an Indian Space Law and put in place a well-established liability regime to make sure the reforms have a rock-solid foundation. 

On Wednesday, the Union Cabinet approved reforms liberalising the FDI policy provisions in the space sector by prescribing a liberalised entry route and providing clarity for foreign investment in satellites, launch vehicles and associated systems or subsystems, creation of spaceports for launching and receiving spacecraft, and manufacturing space-related components and systems. 

The liberalisation ranges from 49% to 100% for various subsectors of the space economy, and it opens an assured roadmap for infusing foreign capital into this sunrise sector. 

Spacefaring is certainly not for the faint-hearted and this also applies to investors, who infuse capital in a sector known for long gestation periods and huge risks. But the returns can also be sky-high. 

Union Minister of State (independent charge) for Science & Technology, Dr Jitendra Singh said the FDI move is a "landmark decision which will boost India's space economy and enable it to contribute to the growth story of a Viksit Bharat". 

The minister, who looks after the activities of the Department of Space, added, "Since India is on a rapid growth path, the space economy of India, which was earlier considered to be very minimal and was hardly taken cognisance of in the overall economic structure, will now play an important role. We have already projected that there will be a US $ 40-billion space economy by 2040. A few foreign reports also suggest that we could even reach $ 100 billion, and now we are closer to that projection". 

"The number of space startups has gone up from just 1 in 2014 to 189 in 2023 as per the DPIIT (Department for Promotion of Industry and Internal Trade) Startup India Portal, and the investment in Indian space startups increased to $ 124.7 million in 2023," he said.  

Rajya Sabha MP, science and technology policy expert and IIT Bombay and MIT, Boston, trained engineer Jairam Ramesh, however, said, "I find it totally inexplicable and it may well herald the privatisation of the Indian Space Research Organisation (ISRO) itself." 

Private Sector's Exploits

While the world showers laurels on India for the historic soft landing nearer the South Pole of the moon with Chandrayaan-3 and the maiden mission to study the Sun with Aditya L-1, one should not miss that, on 18 November, 2022, Skyroot Aerospace Pvt Ltd performed the maiden launch of its 'Vikram S' suborbital rocket, becoming the first Indian private company to reach outer space. 

Agnikul Cosmos Pvt Ltd is also getting ready for the maiden launch of its Agniban rocket that will lift off from its private spaceport 'Dhanush', located within the Satish Dhawan Space Center at Sriharikota. Pixxel, a space data company, launched its first hyperspectral earth imaging satellite in 2022. All of these are examples of young engineering graduates pushing the frontiers of space technology. 

'Game-Changing Decision'

Dr. Pawan Goenka, Chairman, Indian National Space Promotion and Authorisation Centre (IN-SPACe), which is part of the Department of Space, says "The opening up of foreign direct investment in the Indian space sector is a historic game-changing decision that will propel India to new heights in the sector."

Dr Goenka was heading the research unit of Mahindra and Mahindra but now promotes and regulates the vast Indian space ecosystem, and is a respected voice in the industry. 

In the 'Decadal Vision and Strategy for Indian Space Economy', authored in December 2023 by INSPACe, Dr Goenka wrote, "The successful implementation of the roadmap laid out herein will take the value of the Indian space economy to US $44 billion by 2033 and catapult us to an 8% share in the global space economy, a significant leap from the current value of US $8.4 billion and 2% share in the global space economy".

A 2022 report titled 'Developing the Space Ecosystem in India' prepared by EY (formerly known as Ernst & Young) asserted that the "Indian space economy set for a growth of US $13 billion by 2025'. 

The report also highlighted that "India has a well-developed space program, boosted by the realisation of indigenous technology, facilities, systems, and rollout of services in a systematic manner. India accounted for approximately 2.6% of the global space economy in 2020, amounting to US $ 9.6 billion in 2020, which was 0.5% of the GDP in the country."

A quick sobering thought, not all the numbers thrown around are accurate; some are mere guesstimates.

Talking of the space economy, Shri S Somanath, Chairman, ISRO said, "As we embark on this journey of new space enterprise, filled with promises and challenges, our resolve is to transcend boundaries, harness space resources, and capture a sizeable market share of the global space economy. For the Indian space sector, the sky is not the limit, but rather the beginning of an exciting and promising era'. 

Mr Rifath Shaarook of SpaceKidz, Chennai, however, expressed a worry. "As much as (the increased FDI is) great news for the space startup community, I wonder whether it is going to be like Flipkart, Phonepe, etc, where the majority stakeholders are not Indian, and our space startups will become majorly owned by foreign institutions."