Source-This post on 100% FDI in space sector is based on the article “100% FDI to be allowed in space sector: Centre” published in “The Hindu” on 22nd February 2024.
Why in the News?
Recently, the Union Cabinet has approved 100% Foreign Direct Investment (FDI) in the space sector, under the revised FDI policy.
What new changes have been made in foreign direct investment (FDI) norms?
Under the updated FDI policy, the satellite sub-sector has been divided into three different types, with defined limits for foreign investment in each type.
1. Manufacturing of components and systems/sub-systems for satellites, ground segment, and user segment- Under the Automatic route, FDI of up to 100% will be permitted.
Note– Until now, foreign investment in this sub-sector was only permitted up to 100 percent through the government route.
2. Satellite manufacturing and operation, satellite data products, and ground/user segment– The updated policy allows up to 74% FDI under the automatic route. For investments beyond 74%, government approval is required.
3. Launch vehicles and their components– Up to 49% FDI under the automatic route will be allowed. Investments beyond 49% will require government approval.
What is the significance of this initiative?
1. The revised policy aims to attract investors to invest in Indian space companies.
2. It will boost the Indian space sector growth, as the Indian space economy is expected to increase from approximately $8.4 billion now to $44 billion by 2033.
3. This increased private sector involvement will create jobs, facilitate the adoption of modern technology, and promote self-sufficiency in the sector.
4. The revised policy is expected to link Indian firms with global supply chains, allowing them to set up manufacturing plants locally.
What is Foreign Direct investment Investment (FDI)?
About: It refers to investments made by foreign entities in businesses or corporations located in another country.
This can take the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company.
Routes of FDI in India:
1. Automatic Route– Under the Automatic Route, neither the foreign investor nor the Indian company needs approval from the Government of India for the investment.
2. Government Route– Approval from the Government of India is necessary before making an investment. Proposals for FDI under this route are reviewed by the respective Administrative Ministry/Department.
FDI Prohibited sectors in India:
a. Real Estate Business
b. Gambling and Betting
c. Chit Funds
d. Nidhi Company
e. Trading in Transferable Development Rights (TDR)
f. Manufacturing of Tobacco Products
g. Sectors Not Open to Private Sector Investment: Includes atomic energy and railway operations except for activities allowed under the Consolidated FDI policy
h. Lottery Business: Including government or private lotteries, and online lotteries.
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