Under Automatic Route Centre permits up to 74% FDI in Defence Sector

New Delhi: The Central government has permitted Foreign Direct Investment (FDI) of up to 74% under the automatic route in the defence sector with a view to attracting overseas investors.  However, foreign investments will be subject to scrutiny on grounds of national security and the government will have the right to review any investment that has a bearing on the country’s security, said a statement on Thursday.

“Welcome Prime Minister Narendra Modi ji’s decision to amend FDI policy in Defence Sector. Now, FDI is allowed upto 74% through automatic route & beyond 74% to be permitted through Govt route. This will enhance Ease of Doing Business and contribute to growth of investment, income and employment,” Minister of Commerce and Industry Piyush Goyal tweeted.

Foreign investments in defence sector shall be subject to scrutiny on grounds of National Security.

In line with our collective vision of Aatmanirbhar Bharat, amendments will enhance self-reliance in defence production, while keeping national interests & security paramount. pic.twitter.com/LngBhTO0Zb

— Piyush Goyal (@PiyushGoyal) September 18, 2020

Making the announcement on Twitter on Friday, Goyal added that foreign investments in the defence sector will be subject to scrutiny on grounds of national security.

According to an order issued by the Ministry of Commerce and Industry, the FDI limited through government route has been increased to beyond 74 per cent “wherever it is likely to result in access to modern technology or for other reasons to be recorded”.

“Foreign investments in defence sector shall be subject to scrutiny on grounds of National Security. In line with our collective vision of Aatmanirbhar Bharat, amendments will enhance self-reliance in defence production, while keeping national interests & security paramount,” Goyal said in the following tweet.

The government, in its order, said that FDI up to 74 per cent under automatic route shall be permitted for companies seeking new industrial licences.

“Infusion of fresh foreign investment up to 49 per cent, in a company not seeking an 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/shareholding pattern or transfer of stake by existing investor to new foreign investor for FDI up to 49%, within 30 days of such change. Proposals for raising FDI beyond 49% from such companies will require government approval,” the order said.

The government said that the investee company should be structured to be self-sufficient in the areas of product design and development. “The investee/joint venture company along with the manufacturing facility should also have maintenance and life cycle support facility of the product being manufactured in India,” it added.