Press Information Bureau

Government of India

Ministry of Defence

25-November-2016 16:40 IST

The Government liberalized FDI policy provisions on various sector including defence sector vide. Press Note.5 (2016 Series) on 24th June, 2016. As per the current FDI policy, foreign investment upto 49% is permitted under automatic route and beyond 49% through Government approval route wherever it is likely to result in access to modern technology or for other reasons to be recorded. The FDI policy in defence sector is further subject to industrial licensing under the Industries (Development and Regulation) Act 1951. As per earlier policy notified in Nov 2015, FDI upto 49% was permitted under automatic route and FDI above 49% was permitted through Government approval route on case to case basis, wherever it is likely to result in access to modern and state-of-art technology in the country.

As technology requirement changes with time, FDI proposals of beyond 49% are examined by Ministry of Defence from technology perspective, after consultation with various stakeholders such as Armed forces, Defence Research and Development Organisation (DRDO), etc.

The foreign investment proposals beyond 49% are considered by Foreign Investment Promotion Board (FIPB) under Ministry of Finance. FIPB is an inter-ministry body having representatives of Department of Industrial Policy & Promotion, Ministry of Home Affairs and other concerned Departments. So far, since opening of defence sector for FDI, 36 FDI/ JV proposals have been approved for manufacture of various licensable defence items. After the notification of revised FDI policy in June 2016, a total of 06 proposals have been received by the FIPB.

This information was given by Minister of State for Defence Dr. Subhash Bhamre in a written reply to Dr. Shashi Tharoor in Lok Sabha today.

*****

NAMPI/RAJ

Foreign investment limits in defence sector: minority stakes get automatic clearance; larger holdings require government approval and technology scrutiny. The regulatory framework distinguishes automatic approval for minority foreign holdings from a government approval route for larger foreign participation, with industrial licensing under the Industries (Development and Regulation) Act, 1951, remaining applicable. Proposals exceeding the automatic threshold are examined for technology access by the defence ministry with stakeholder consultation and pass through an inter-ministerial foreign investment clearance process coordinated by the finance ministry.