Easing FDI norms in space sector to attract foreign players, boost demand for high-tech jobs

New Delhi: The government’s decision to ease foreign direct investment (FDI) in the space sector will help attract foreign players as well as startups and will boost demand for high-tech jobs, experts say. The government has eased FDI norms in the sector by allowing 100 per cent overseas investment in making components for satellites, as part of efforts to attract overseas players and private companies into the segment.

The provisions were notified last month.

Sreeram Ananthasayanam, Partner, Deloitte India, said that the recent amendment of higher FDI limits in the space sector is a significant step towards transforming India’s space program, in terms of infrastructure development.

“For the private sector, it opens doors to new business opportunities, it presents an opportunity to leverage private investments to enhance space capabilities, access to cutting-edge technologies to accelerate and develop next-gen space products, and collaboration with global players,” Ananthasayanam said.

For the government, it reduces the burden on public finances for its usage of funds to enable space ecosystem in India, he said.

“This burgeoning space industry will create a high demand for high-tech jobs for engineers, scientists, and other skilled professionals. The initiatives by government organizations, academic institutes will create the talent pool for meeting the demand will further fuel innovation and propel India’s spacefaring ambitions,” Ananthasayanam added. He also said that manufacturing of subsystems related to launch vehicles, satellites and ground stations by the private sector would find a direct revenue stream in the upcoming missions of Indian Space Research Organisation (ISRO) and other space programs around the world. The country currently boasts around 200 space startups registered with the Department for Promotion of Industry and Internal Trade (DPIIT), with several showcasing their prowess in the field, he said.

However, he said, the space sector presents unique challenges, including technological complexities and long gestation periods.

“To further bolster the space ecosystem and enable more Indian startups to establish themselves, substantial investments are essential. These investments will not only drive innovation and technological advancement but also create a conducive environment for the growth of the space industry in India,” Ananthasayanam said.

Further, he said that a handful of manufacturers supporting ISRO by supplying components in a build-to-spec and build-to-print model are already making revenues north of several hundred crores, hiring thousands of individuals.

“For the sector to truly scale, the number of such firms should be at least in the double digits,” he added.

Revathy Muralidharan, Partner, IndusLaw, said the increased competition due to entry of new players and strategic investors will force the domestic players to develop cutting-edge, highly competitive technologies to keep up their positions in the Indian space market.

He added that opening up of the sector for foreign investors will also bring in the much needed liquidity into the capital intensive industry and will certainly help the private players to compete on a global scale.

With this decision, the Indian space sector will certainly see FDI inflows largely from two groups of investors — strategic investors and private equity players.

Iqbal Khan, Partner, Shardul Amarchand Managaldas & Co said that a higher participation of private players is essential to tap commercial opportunities, generate jobs.

“The liberalized FDI norms will bolster opportunities for domestic companies that aim to launch their own constellation of satellites to enable communication systems, real time monitoring and surveillance,” Khan said.