India Approves 100 Percent FDI In Defense Sector

Foreign defense firms can now set up full y owned subsidiary in India following Indian government’s decision to increase Foreign Direct Investment (FDI) in the defense sector to 100 per cent from 49 per cent.

The government of India, today made amendments to the existing FDI policy. The increase in FDI policy will see increased sectoral caps and will also bring more activities under automatic route.

The FDI policy amendments are meant to liberalize and simplify the FDI policy so as to provide ease of doing business in the country leading to larger FDI inflows contributing to growth of investment, incomes and employment, the cabinet said in an official statement Wednesday.

Earlier FDI regime permitted 49 per cent FDI participation in the equity of a company under automatic route. FDI above 49 per cent was permitted through Government approval on case to case basis, wherever it is likely to result in access to modern and ‘state-of-art’ technology in the country. In this regard, the following changes have inter-alia been brought in the FDI policy on this sector,

Foreign investment beyond 49 per cent has now been permitted through government approval route wherever it is likely to result in access to modern technology or for other reasons to be recorded.  FDI limit for defense sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959, the statement said.