The Centre has amended its foreign direct investment (FDI) policy for the space sector, tweaking how much percentage of equity a foreign entity may acquire in three different sub-sectors through the automatic route – 49 per cent in launch vehicle manufacture and spaceports, 74 per cent in satellite manufacture and 100 per cent in components and sub-systems for satellites and ground station hardware. These numbers are not FDI limits, but the percentages allowed through the ‘automatic route’ — higher holding is possible with government approval.

While the government has not explicitly disclosed the rationale behind these categories, the logic is not hard to divine. Manufacturing of rockets (49 per cent through automatic route) is governed by the Missile Technology Control Regime (MCTR), an informal political understanding among member countries, which discourages laxity in control. India, which was admitted into MCTR in 2016, would like its policies to be devoid of any whiff of proliferation.

Allowing 74 per cent stake through the ‘automatic’ route in satellite making must be viewed in the context of two factors: rising global conflicts and a global economic slowdown. On the first, there has been a disruption on account of Ukraine, Russia and China being major players in this industry. As for the second, India as a low cost producer of satellites stands to gain. This is an opportune moment for India to amble into satellite making, as tens of thousands of satellites are slated to be launched in coming years. The amendment makes it alluring to foreign entities to manufacture satellites in India, while reserving a slice for Indian businesses. However, satellite manufacturing is fraught with suspicions of spyware. That is why the government has allowed 100 per cent automatic FDI in components and sub-systems — a foreign investor may have full control over manufacture and exports.

Two other broad trends have contributed to a liberalised space policy. One is the ‘China-plus-one’ approach, where investment is expected to fork away from China into countries such as India. India would like to position itself as a credible alternative to China in making satellites. The other is India’s ‘production-linked incentive’ (PLI) scheme for electronics manufacture. For those who avail themselves of the PLI, satellite manufacturing can be a ready market. Enlarging this market by inviting FDI would spur the electronics industry.

The idea of private participation in space has somehow got hooked with start-ups. But there are many MSMEs in this space which can now access foreign investment. It is believed that this policy took about two years to make. IN-SPACe, the nodal agency for facilitating private sector participation in the space sector has developed this policy after numerous industry consultations. There is perhaps no need for government to pore into every FDI deal — broad oversight is enough. FDI in space can work as a good launching pad.