FDI in Defence: In a major policy decision to attract foreign direct investment (FDI) in the defence sector, India’s finance minister Nirmala Sitharaman Saturday announced that now 74% FDI in defence sector will be permitted under the automatic clearance route.
In May 2001, India had opened the defence sector for private companies and they were allowed to bring foreign direct investment of up to 26% in the country, subject to licensing.
In 2016, the FDI limit in the defence sector was increased to 49% by Prime Minister Narendra Modi.
However, the cap of 49% proved an impediment as foreign defence companies were not allowed to have management control of the joint venture company.
Attracting FDI in Defence remains a challenge
According to the latest official data given by the government in Parliament in March this year, the country received foreign direct investment of Rs 1,834 crore ($241.8 million) in five years, 2014-2019 period.
However, a bulk of this FDI amount, $218 million or over 90% of the total FDI investment of $241.8 million, was received in the last financial year (April 2018-March 2019).
Increase in the FDI cap in defence sector has been announced as part of Prime Minister Narendra Modi’s ambitious Self-Reliant India campaign (Atma Nirbhar Bharat Abhiyan).