India Allows 100 Percent FDI In Defense, Aviation Sectors

The government of India announced changes to the country’s foreign direct investment (FDI) policy Monday, which allows 100 percent foreign investment in defense, civil aviation and pharmaceutical sectors.

Previously, FDI in the defense sector was capped at 49 percent and now, 100 percent FDI will be allowed by the government on a case-specific basis, when “it is likely to result in access to modern and ‘state-of-art’ technology in the country”, an Indian Commerce Ministry statement said Monday.

“Defense contractors that have been reluctant to transfer technology to manufacture equipment in India would get the right to own local operations outright, up from 49 percent previously,” the statement said.

The policy is also applicable to the manufacturing of small arms and ammunitions, which was earlier outside the purview of the policy.

In civil aviation, 100 percent FDI is now allowed for both greenfield and brownfield airport projects. Earlier, brownfield projects had an automatic cap of 74 percent, which could be further hiked to 100 percent after seeking government approval. FDI in airlines has also been raised to 100 percent from the existing 49 percent, but foreign investors seeking a greater than 49 percent stake would require government approval. However, foreign carriers still cannot buy more than 49 percent of an existing Indian airline.