Latest on FDI in Defence Sector

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.