FDI in Defence up to 74% Under Automatic Route

The FDI limit in the defense sector has been increased from 49% to 74% through the automatic route and beyond 74% through the government route.

The Minister of Commerce and Industry, Piyush Goyal Tweeted, "Now, FDI is allowed up to 74% through automatic route & beyond 74% to be permitted through the Govt route. This will enhance Ease of Doing Business and contribute to the growth of investment, income, and employment,".

Piyush Goyal further added that foreign investments in the defense sector will be subject to scrutiny on grounds of national security. The FDI limit through the government route has been increased to above 74% "wherever it is likely to result in access to modern technology or for other reasons to be recorded".

The Minister also tweeted "Foreign investments in the defense sector shall be subject to scrutiny on grounds of National Security. In line with our collective vision of Atma Nirbhar Bharat, amendments will enhance self-reliance in defense production, while keeping national interests & security paramount."

The government order says that "Infusion of fresh foreign investment up to 49 percent, 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 order further said that "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."