India Allows Up To 74% FDI Under Automatic Route In Defence Sector
Akash surface-to-air missiles are displayed by the Defence Research and Development Organisation during the DefExpo 20 in Lucknow, Uttar Pradesh, India. (Photographer T. Narayan/Bloomberg)

India Allows Up To 74% FDI Under Automatic Route In Defence Sector

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The government has permitted foreign direct investment of up to 74% under automatic route in the defence sector with a view to attracting overseas investors.

However, foreign investments in the defence sector would be subject to scrutiny on the grounds of national security and the government reserves the right to review any investment in the sector that affects or may affect national security, the Department for Promotion of Industry and Internal Trade said in a press note.

As per the current FDI policy, 100% overseas investments are permitted in the defence industry—49% under the automatic route, while government approval was required beyond that. According to the release, “FDI up to 74% under automatic route shall be permitted for companies seeking new industrial licences”.

It also said that infusion of fresh investment up to 49%, in a company not seeking industrial licence or which already has government approval for FDI in defence, shall require “mandatory” submission of a declaration with the defence ministry in the case of change in shareholding pattern or transfer of stake by to a new foreign investor, within 30 days of such change.

Proposal for raising FDI beyond 49% from such companies will require government approval, it added. “The decision will take effect from the date of FEMA (Foreign Exchange Management Act) notification,” it said.

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