The Industry Ministry, which proposed 74 per cent FDI in the defence sector, has said even 100 per cent foreign investment would be "desirable" for the country to have latest technology for armed forces.

"In case if we really want to have the state of art technology, we have to permit anything above 50 per cent if not 100 per cent. It may be therefore, desirable to allow either 100 per cent or 74 per cent (FDI) as in the telecom sector," the discussion paper of the Department of Industrial Policy and Promotion (DIPP) on the issue has said.

The DIPP allayed concerns that the national security could be compromised by removing the ceiling on the FDI in the sensitive sector.

In any case, FDI would be subject to licensing provision.

At present, 26 per cent FDI is allowed in defence sector. Foreign direct investment policy in defence desirable to permit higher FDI, subject to licensing safeguards to protect security. The discussion paper urges permitting substantially higher Foreign Direct Investment in the defence sector to access advanced technology, referencing the telecom sector's higher allowance, while stressing that any elevation or removal of the FDI cap would remain subject to licensing requirements and security-related regulatory controls.