Ahead of Elon Musk's India visit, finance ministry notifies new FDI limits for satellites

The Finance Ministry has notified new foreign direct investment limits under the Foreign Exchange Management Rules for satellite related activities, enabling foreign investors to firm up investment plans in the sector.

The move comes after the Union Cabinet had in February this year approved a policy for liberalising foreign investments in the space sector.

This allows up to 100% FDI in the sector with 74% under the automatic route for satellite manufacturing and operations, ground segment and user segment as well as satellite data products.

The notification by the finance ministry comes just days ahead of Elon Musk’s visit to India where he is reported to meet Indian space companies. The Tesla CEO is slated to visit India on April 21 and 22. Approvals are also almost in place for his satellite internet venture Starlink.

According to the Finance Ministry notification, the new rules called the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2024 are effective from April 16.

Up to 100% FDI under the automatic route is now permitted for manufacturing of components and systems or sub-systems for satellites, Ground Segment and User Segment. FDI upto 49% under the automatic route is now permitted for launch vehicles and associated systems or sub-systems and creation of spaceports for launching and receiving spacecraft while beyond this limit government approval will be required.

“The investee entity shall be subject to sectoral guidelines as issued by the Department of Space from time to time,” said the notification.
Previously, FDI in the sector was permitted in establishment and operation of satellites through the government approval route only.

Experts noted that the revision of FDI regulations in the space sector marks a significant stride towards fostering innovation and global collaboration. Winnie Shekhar, Partner, IndusLaw said, “The relaxation of FDI limits up to 74% for satellite manufacturing, operation, and related activities underlines India's determination to attract foreign investment while safeguarding national interests. The move to liberalise FDI in the segment, not only accelerates economic growth but also strengthens India's position in the global space arena and underscores India's commitment to becoming a leading hub for space technology and exploration.”

As India embraces the 'Make in India' initiative and positions itself as a manufacturing powerhouse, the collaboration with Elon Musk and SpaceX holds immense promise for the country's space aspirations both at level of government partnership and participation as well as boost for private players, Shekhar further said.