Opportunities for businesses to invest in the Indian space sector

In 2023, the Indian government announced that the number of Indian Space Start-Ups had jumped from 1 in 2014 to an extraordinary 189 in 2023.

The Union Minister of State for Atomic Energy and Space, Dr Jitendra Singh, stated that the Indian Space Economy was estimated at $8.4billion with the expectation that it could grow to $44billion by 2033 with the implementation of the Indian Space Policy 2023: a bold prediction.

One potential stumbling block to the stated aim of driving commercial growth had been the somewhat prohibitive rules relating to Foreign Direct Investment ("FDI") into the sector. This challenge at least is starting to be addressed. The Press Note 1 of 2024 has liberalised FDI into the sector, which will take effect when the Indian government issues a formal notification to bring this into effect.

What are the current rules?

Under the current rules, 100% FDI is permitted, but only with prior government approval and only for investments in a single category, namely Satellites.

What does Press Note 1 say?

Up to 100% FDI will now be permitted across several categories, including:

• Satellite Manufacturing & Operation.
• Satellite Data Products.
• Ground Segment & User Segment.
• Launch Vehicles and associated systems or subsystems.
• Creation of Spaceports.
• Manufacturing of components and systems/sub-systems for satellites, ground segment and user segment.

These changes have the potential to unlock opportunities for significant overseas investment across the wider space sector in India. The challenge then becomes:

• How do Indian businesses identify potential overseas partners with which to collaborate and expand in this dynamic sector?
• How does an overseas business take strategic advantage of this opportunity?

What else do I need to know?

For the categories that cover satellites, satellite data products, ground segment and user segment there is an automatic route for up to 74% FDI. Beyond 74% requires government approval. This covers a range of activities including end-to-end manufacturing and supply of satellite and/or payload, establishing satellite systems including in-orbit control, and the reception, generation and dissemination of Earth Observation ("EO") and remote sensing satellite data. EO is increasingly crucial for measuring environmental impacts and a potential growth area for investment so the opening of FDI in this area is of interest.

Launch vehicles and spaceports are subject to tighter caps. Up to 49% of FDI is automatically permitted, beyond that government approval is required. As well as spaceports and launch sites this covers vehicles and all the stages or components designed to operate in or place spacecraft with payloads or persons in a suborbital trajectory, earth orbit, or outer space.

An area of potential interest here is the nascent space tourism industry. FDI would potentially be allowed up to 49% automatically in a space tourism operation.

What happens next?

The expected notification from the Indian government is also expected to clarify some of the details that the industry will need to progress with seeking investment.

How does my business take this forward?

The liberalisation of FDI in the sector is designed to boost investment interest from across the world, into an industry for which India rightly has acquired a formidable reputation. Experience has taught us that clients who are strategic and focused in making their investment decisions are the ones whose work yields the greatest returns. 

The Foot Anstey Space and Satellite team has worked closely with businesses across the United Kingdom through the 'Foot Anstey Enterprise' programme, which helps businesses to maximise their opportunity to grow by reducing the barriers associated with, for example needing to protect brand, raising capital and navigating the regulatory framework. Our market leading work with Spaceport Cornwall, space clusters across the UK and major industry organisations such as Goonhilly Earth Station, mark out Foot Anstey's Space lawyers as real experts. Learn more about the investment market in the UK space sector with our helpful overview.

As a firm with an international focus, we have worked closely with overseas partners, notably Trust Legal in New Delhi, whose highly regarded expertise in helping businesses operate and flourish in India has benefited our commercial clients in many different sectors in recent years. Trust Legal is at the forefront of advisory work across the country and advises technology businesses on their growth aspirations, as well as some of the largest and well known businesses in India.

Innovation in the Indian space sector is driving remarkable progress, with initiatives like the Gaganyaan mission poised to make history. At Trust Legal, we're dedicated to supporting this momentum, offering strategic legal guidance to businesses venturing into the cosmos of space exploration.

Sudhir Mishra | Founder & Managing Partner, Trust Legal

Whether your business, or clients, are based overseas and looking to collaborate with Indian businesses to take advantage of the liberalisation of trade rules described here or based in India and looking to form a strategic alliance with such overseas businesses, the specialist lawyers at Foot Anstey LLP and Trust Legal are well placed to make collaboration happen and power the ambition of dynamic space businesses.