To accelerate the inflow of investments, and employment generation, the Centre has enhanced the FDI limit for the defence sector by allowing up to 74 per cent capital via automatic route.
Government approval will be required for intake of foreign capital beyond 74 per cent 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 per cent under automatic route shall be permitted for companies seeking new industrial licenses,” DPIIT said in a press note.
“Infusion of fresh foreign investment up to 49 per cent, in a company not seeking industrial license 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 new foreign investor for FDI up to 49 per cent within 30 days of such change.”
“Proposals for raising FDI beyond 49 per cent from such companies will require government approval.”
The development assumes significance as the Centre is trying to boost the domestic defence sector manufacturing.
At present, India is considered to be one of the largest weapons importers in the world.
In a tweet, Minister of Railways and Commerce and Industry Piyush Goyal said the move will allow for enhanced ‘Ease of Doing Business’ and contribute to the growth of investment, income and employment.
“Welcome PM @NarendraModiaji’s decision to amend FDI policy in the Defence Sector.
“Now, FDI is allowed up to 74 per cent through automatic route & beyond 74 per cent to be permitted through the Govt route.
“This will enhance Ease of Doing Business & contribute to growth of investment, income & employment,” said Goyal.