The Government of India reviewed its FDI policy in defence sector on Friday and permitted an FDI of up to 74% under automatic route for companies seeking new industrial licences.
Raising FDI beyond 49% from such companies will require government approval. Licence applications will be considered by the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, in consultation with the Ministry of Defence and Ministry of External Affairs.
Foreign investment in the sector is subject to security clearance by the Ministry of Home Affairs and as per guidelines of the Ministry of Defence.
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.
Foreign investments in the defence sector shall be subject to scrutiny on grounds of national security and government reserves the right to review any foreign investment in the defence sector that affects or may affect national security, according to a government release.