Daily Current Affairs for UPSC

Policy regarding Foreign Direct Investment in the space sector

Syllabus: Economy[GS Paper-3]


The Union Cabinet, led by Prime Minister Narendra Modi, has approved changes to the Foreign Direct Investment (FDI) policy for the space sector.

Key Points:

  • The satellite sub-sector in India has been separated into three activities, each with specific restrictions on foreign investment. 
  • The Indian Space Policy 2023 has been implemented to increase private participation in the space sector. 
  • This reform in the FDI policy will improve the business environment and attract more foreign investment, leading to economic growth and job creation.

Foreign Direct Investment:

  • Foreign Direct Investment (FDI) is the process of information for residents of a given country to buy assets in another country in order to be the owning company.
  • There is a difference between the foreign portfolio investment (FPI) and the Foreign Direct Investment (FDI) where the foreign entity buys the stocks and bonds and has no control over them.
  • FDI means foreign capital in which a foreign investor participates such as equity capital, reinvested earnings, and inter-firm loans.
  • Equity capital is when an investor acquires the shares of a foreign company, reinvested earnings are the investor’s share of profits that are not distributed as dividends, and the intra-company loan is borrowing and lending between the investor and its affiliates.

Role of FDI in Space sector:

  • According to the current FDI policy, approval from the government is required for foreign investment in the establishment and operation of Satellites. 
  • However, the amended policy now allows for 100% FDI in the space sector. 
  • This change is intended to encourage potential investors to invest in Indian space companies.

Changes in policies regarding foreign direct investment (FDI) in the space sector:

  • The proposed reforms aim to make the FDI policy in the space sector more flexible by allowing foreign investment in satellites, launch vehicles, spaceports, and manufacturing of space-related components. 
  • These changes are intended to attract investors to invest in Indian space companies.

The different activities included in the updated policy have specific entry routes:

  • Upto 74% under Automatic route: The majority of activities related to the manufacturing and operation of satellites, satellite data products, and ground and user segments are controlled by the government, accounting for over 74%.
  • Upto 49% under Automatic route: Launch vehicles and their systems, as well as the establishment of spaceports for spacecraft launches and landings, are primarily controlled by the government when they exceed 49% ownership.
  • Upto 100% under Automatic route: The production of parts and systems for satellites, as well as the ground and user segments.

Importance of foreign direct investment (FDI) in Space sector:

  • The space sector in India is turning towards the participation of private players and creation of networks for Indian companies in global value chains.
  • Thus, this motion capitalises on the commercial utilisation of space-related technologies and encourages more business participation in the sector.
  • The popularity of India in the successful completion of space missions is due to its reputation of reliable and cost-effective space solutions.
  • The integration of those Indian Companies into global value chains will let them get a chance to absorb the latest technology, expand their businesses and capture large parts of the global markets.
  • Moreover, the government’s “Make In India” policy will be refined since companies will be able to set up their manufacturing plants within the country.
  • Moreover, the new FDI laws will help in reducing the cost of doing business in India, thus, inviting more foreign investment, which in turn will contribute to economic growth.
  • In addition to that, the diversity of FDI in the space industry will facilitate the technology exchange and research inventions.


India’s space industry is on the path to success, with major policy reforms, higher foreign investments, and a focus on involving the private sector. This will have a long-lasting impact on space exploration and technology, driving substantial growth and ushering in a new era of space exploration.


UPSC Prelims Practice Question:

Q.Consider the following: (2021)

  1. Foreign currency convertible bonds
  2. Foreign institutional investment with certain conditions
  3. Global depository receipts
  4. Non-resident external deposits

Which of the above can be included in Foreign Direct Investments?

a. 1, 2 and 3

b. 3 only

c. 2 and 4

c. 1 and 4

Ans: “a”

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