FDI for the space sector under the FEMA

Context

The Union Finance Ministry notified new rules backing Foreign Direct Investment (FDI) for the space sector under the Foreign Exchange Management Act (FEMA).

FDI in Space Sector

• The Finance Ministry came with new guidelines, known as the Foreign Exchange Management (Non-debt Instruments) (3rd Amendment) Rules, 2024, that provide a liberalised access direction for FDI in satellites, launch motors, spaceports, and production space-associated additives and systems.
• According to it, 100% percent FDI has been allowed for the space region category of producing and operation of satellites, satellite tv for pc statistics products, and floor section and consumer phase.
• Out of this, up to 74% would be by the automatic path and government nod would be required for investment beyond that.
• Under the sooner policy, any overseas investment in production and operating satellites became allowed only with government approval.

Significances of FDI in Space Sectors

• Private Sector Participation: The Indian space structure is transferring from constructing India’s skills under ISRO to further capitalization of area-based technology for business programs in addition to industry involvement in the region.
  • It is expected to integrate Indian agencies into global value chains.
• Space Missions: India has carried out many enormous feats in area missions and has set up its call in the global image as a company of reliable and cost-effective space solutions.
• Technology Absorption and Global Integration: It will enable recent technology absorption.
  • With expanded funding, companies may want to reap sophistication of products, worldwide scale of operations, and better share of the global technology economic system.
  • It is predicted to integrate Indian agencies into international cost chains.
• Boost Manufacturing: Companies may be capable of installing their manufacturing facilities in the country, encouraging the Government’s ‘Make In India’ initiative.
• Ease of Doing Business: The FDI coverage reform will beautify Ease of Doing Business in the country, leading to more FDI inflows and thereby contributing to the increase of funding, income, and employment.
• Promote Research and Innovations: FDI in space will promote technology switch and research innovations.

Concerns and Challenges

• Limited Investor Interest: There is restricted investor interest at later levels of improvement.
  • This might be due to the high-risk nature of area investments and the long-term return on investment.
• Talent Pool: The skills pool for area tech startups needs to grow.
  • There is a need for higher skilled professionals in the field of space technology.
• Policy Clarity: There is a need for more coverage readability.
  • Clear and constant guidelines can help attract higher foreign investors.
• Simplifying the FDI Process: The manner for overseas direct investment needs to be simplified.
  • A complex technique can deter capacity investors.
• Capital-Intensive Requirements: Space technology is capital-intensive.
  • This approach calls for a big quantity of capital funding, which may be an undertaking for startups and smaller corporations.
• Conflict of Interest with ISRO: Foreign traders had been on the fence about making an investment inside the Government monopolised Indian space zone.
  • The warfare of interest with ISRO as a competitor had perpetuated apprehension inside the minds of foreign buyers.

Conclusion

• The liberalisation of the FDI coverage in the space sector is a strategic move by the Indian government to lower access boundaries for foreign players looking to collaborate with or spend money on Indian area enterprises.
• This move is about to revolutionise the Indian space sector by starting new avenues for overseas investment and participation, thereby accelerating India’s adventure toward becoming a global space powerhouse.

Source: The Hindu

UPSC Mains Practice Question

Q.What is India’s plan to have its own space station and how will it benefit our space programme? (2019

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