Govt permits up to 74% FDI in defence sector under automatic route

New Delhi, Sept 18: Reviewing Foreign Direct Investment (FDI) Policy in Defence Sector, the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry has issued a press note on Friday. It has increased the FDI limit in the defence sector from 49 to 74 per cent under automatic route and beyond 74 per cent through the government route. This would "result in access to modern technology or for other reasons to be recorded", it stated.

 

 

 

"Welcome Prime Minister Narendra Modi Ji's decision to amend FDI policy in Defence Sector. Now, FDI is allowed up to 74% through automatic route & beyond 74% to be permitted through Govt route. This will enhance Ease of Doing Business and contribute to the growth of investment, income and employment," Minister of Commerce and Industry Piyush Goyal tweeted.

 

 

Foreign investments in the defence sector will be subject to scrutiny on grounds of national security, he said. "Foreign investments in defence sector shall be subject to scrutiny on grounds of National Security. In line with our collective vision of Aatmanirbhar Bharat, amendments will enhance self-reliance in defence production, while keeping national interests & security paramount," Goyal said in the following tweet.

 

According to the statement said in a release, the Ministry stated, "Infusion of fresh foreign investment up to 49%, in a company not seeking an industrial license or which already has Government approval for FDI in Defence, shall require mandatory submission of a declaration with the Ministry of Defence in case change in equity/shareholding pattern or transfer of stake by existing investor to a new foreign investor for FDI up to 49%, within 30 days of such change. Proposals for raising FDI beyond 49% from such companies will require Government approval."

 

The government has retained the condition that the investee company should be structured to be self-sufficient in the areas of product design and development. "The investee/joint venture company along with the manufacturing facility should also have maintenance and life cycle support facility of the product being manufactured in India," it said.

 

Licence applications will be considered and licences will be given by the DPIIT in consultation with the Ministry of Defence and Ministry of External Affairs. Meanwhile, the decision will take effect from the date of the Foreign Exchange Management Act notification.