Table of Contents
The Liberalization of Foreign Direct Investment in India’s Space Sector
After the touchdown by ISRO’s Chandrayaan-3 spacecraft near the moon’s South pole, three G-20 countries have expressed interest in possible collaborations or partnerships with India in the space sector.
| Photo Credit: PTI
Significance
The liberalization of foreign direct investment (FDI) norms in India’s space sector holds immense significance as it aims to attract overseas players and private companies. With the recent success of ISRO’s Chandrayaan-3 spacecraft, India has become an attractive partner for potential collaborations and partnerships in the space industry.
Features
The proposed changes in FDI norms in the space sector are currently being discussed among different ministries. The objective is to create a favorable environment for foreign companies to invest in India’s rapidly growing space sector. The exact details of the proposed changes have not been disclosed yet.
Objectives
The main objective of liberalizing FDI norms in the space sector is to attract more foreign investments, which will spur technological advancements, enhance research and development capabilities, and foster collaborations in space exploration and related activities. This move also aligns with the Indian Space Policy 2023, which focuses on increasing private sector participation in the space industry.
Effects
If implemented successfully, the liberalization of FDI norms in the space sector can have several positive effects. It can stimulate economic growth through increased investments and job creation. It can also lead to the transfer of advanced space technologies from foreign companies to India, boosting the country’s space capabilities. Furthermore, collaborations with international partners can accelerate space exploration and contribute to scientific discoveries.
Pros and Cons
While the liberalization of FDI norms in the space sector has numerous advantages, there are also potential drawbacks to consider. Pros include attracting capital inflow, fostering a robust private space ecosystem, and establishing sustainable market demand for startups. However, cons may involve concerns about foreign influence on the country’s space agenda and the need to safeguard national interests and security.
Fun Fact
According to a Deloitte-CII report, the global space economy is valued at about USD 546 billion in 2022, projected to reach about USD 1 trillion by 2040. This growth is driven by cost reduction efforts and technological advancements.
Mutiple Choice Questions
1. Which sector is the Indian government looking to further liberalize foreign direct investment (FDI) norms?
a) Education sector
b) Health sector
c) Space sector
d) Automotive sector
Explanation: The Indian government is looking to further liberalize foreign direct investment (FDI) norms in the space sector to attract overseas players and private companies.
2. What is the current limit for FDI in the space sector?
a) 50%
b) 75%
c) 100%
d) No limit
Explanation: Currently, FDI in the space sector is allowed up to 100% in the area of satellite establishment and operations through government route only.
3. Which countries have expressed interest in possible collaborations or partnerships with India in the space sector?
a) G-7 countries
b) BRICS countries
c) G-20 countries
d) ASEAN countries
Explanation: After the touchdown by ISRO’s Chandrayaan-3 spacecraft near the moon’s South pole, three G-20 countries have expressed interest in possible collaborations or partnerships with India in the space sector.
4. What is the estimated value of the global space economy in 2022?
a) USD 100 billion
b) USD 546 billion
c) USD 1 trillion
d) USD 2 trillion
Explanation: The global space economy is valued at about USD 546 billion in 2022 and is projected to reach about USD 1 trillion by 2040.
5. What is the purpose of the Indian Space Policy 2023?
a) To promote space tourism
b) To institutionalize private sector participation in the space sector
c) To establish a moon base
d) To discover extraterrestrial life
Explanation: The Indian Space Policy 2023 seeks to institutionalize private sector participation in the space sector, with ISRO focusing on research and development of advanced space technologies.
6. What is the role of NewSpace India Limited (NSIL) according to the Indian Space Policy-2023?
a) Research and Development (R&D) outfits
b) Manufacturers of space hardware
c) Providers of space-enabled products and services
d) Space sector PSU
Explanation: The Indian Space Policy-2023 delineated the roles and responsibilities of ISRO, space sector PSU NewSpace India Limited (NSIL), and Indian National Space Promotion and Authorization Center (IN-SPACe).
7. How can the Indian government incentivize companies engaged in space sector activities?
a) Tax exemptions
b) Tax holidays
c) Accelerated depreciation
d) All of the above
Explanation: The Indian government can provide tax exemptions, tax holidays, and accelerated depreciation for companies directly or indirectly engaged in space sector activities to incentivize them.
8. According to a report, what is the need for creating a sustainable market demand for private startups in the space sector?
a) To attract investors
b) To establish a robust private space ecosystem in India
c) To enhance government contracts
d) To drive cost reduction efforts
Explanation: There is a need for creating a sustainable market demand for the private startups, which in turn contributes to the establishment of a robust private space ecosystem in India.
9. What is the initial customer base for numerous startups in the space sector?
a) General consumers
b) Governments
c) Investors
d) Space agencies
Explanation: Within the space industry, governments often serve as the initial customers for numerous startups, while also acting as stable clients for companies engaged in strategic space and national security initiatives.
10. How are space agencies fostering capital inflow in the space sector?
a) Offering government contracts
b) Providing tax incentives
c) Attracting foreign investors
d) All of the above
Explanation: Space agencies are fostering capital inflow in the space sector by offering government contracts, providing tax incentives, and attracting foreign investors.
Brief Summary | UPSC – IAS
Three G-20 countries have expressed interest in collaborating with India in the space sector following the successful touchdown of ISRO’s Chandrayaan-3 spacecraft near the moon’s South pole. To attract foreign players and private companies, the Indian government is currently discussing the liberalisation of foreign direct investment (FDI) norms in the space sector. Presently, FDI is allowed up to 100% for satellite establishment and operations through the government route only. The Indian Space Policy 2023, which aims to involve the private sector in the space industry, has already been approved. The global space economy is projected to reach $1 trillion by 2040.