Indian finance ministry notifies 100% FDI for satellites ahead of Elon Musk's India visit

India will now allow up to 100 per cent FDI investment in satellite technology. Image Credit: Reuters

The Ministry of Finance, led by Nirmala Sitharaman, has notified new Foreign Direct Investment (FDI) regulations for satellites within the Foreign Exchange Management Rules, with the aim to increase investment in satellite-related activities by foreign entities.

This development follows the Union Cabinet’s recent approval of a policy that is set to liberalise foreign investments within the space sector.

Under these new guidelines, foreign investors can now invest up to 100 per cent of FDI into the sector, with 74 per cent being under the automatic route. This includes investments in satellite manufacturing and operations, the ground segment, user segment, as well as satellite data products.

Notably, this notification arrives just days ahead of the anticipated visit of Elon Musk, CEO of Tesla, to India. Musk is reportedly scheduled to meet with various Indian space companies during his visit from April 21 to 22. Concurrently, approvals for Musk’s satellite internet project, Starlink, are nearing finalization.

The Finance Ministry’s notification, named the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2024, came into effect on April 16.

Under these updated regulations, foreign investors are now permitted to invest up to 100 per cent under the automatic route for the manufacturing of satellite components, systems, or sub-systems, as well as for the ground segment and user segment.

Additionally, FDI of up to 49 per cent under the automatic route is now allowed for launch vehicles, associated systems or sub-systems, and the establishment of spaceports. However, investments beyond this threshold will necessitate government approval.

The notification also emphasizes that the investee entity must adhere to sectoral guidelines issued by the Department of Space. Previously, FDI within the sector was confined to the establishment and operation of satellites, requiring approval from the government.

These regulatory updates signal the Indian government’s intent to attract greater foreign investment and expertise into the space sector. By liberalizing FDI limits and streamlining approval processes, the government aims to foster innovation, technological advancements, and economic growth within the satellite industry.