The Centre has enhanced the FDI limit for the defence sector by allowing up to 74 percent capital via automatic route.
Now, government approval will be required for intake of foreign capital beyond 74 percent with a stipulation that the foreign capital “is likely to result in access to modern technology or for other reasons to be recorded”.
According to the Department for Promotion of Industry and Internal Trade (DPIIT), the decision will take effect from the date of FEMA (Foreign Exchange Management Act) notification.
“FDI up to 74 percent under automatic route shall be permitted for companies seeking new industrial licences,” DPIIT said in a press note.
“Infusion of fresh foreign investment up to 49 percent, in a company not seeking an industrial licence 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 or shareholding pattern or transfer of stake by existing investor to a new foreign investor for FDI up to 49 percent within 30 days of such change. Proposals for raising FDI beyond 49 percent from such companies will require government approval,” the press release added.
The development assumes significance as the Centre is trying to boost domestic defence sector manufacturing.
At present, India is considered to be one of the largest weapons importers in the world.
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