FDI limit in defence increased from 49% to 74%

The Government has raised the cap of Foreign Direct Investment (FDI) limit in the defence sector under the automatic route from 49% to 74% and beyond 74% through the government route, wherever it is likely to result in access to modern technology or for other reasons to be recorded.However, foreign investment in the Defence Sector shall be subject to scrutiny on ground of National Security and the Government reserves the right to review any foreign investment in the Defence Sector that may affect national security. The National Security clause is in addition to the existing four conditions specific to FDI in the defence manufacturing sector including security clearance and some guidelines of the Ministry of Defence. Through a more liberalised FDI policy, the Government wants Foreign Original Equipment Manufacturers (OEM) to shift operations to India and also encourage private players to play a larger role.

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