Meri Sarkar: In a major policy decision to attract foreign direct investment (FDI) in defence sector, Prime Minister Narendra Modi’s government Saturday allowed 74% Foreign Direct Investment (FDI) in Defence sector under automatric route.
“FDI limit in defence sector has been increased from 49% to 74%, but it will be subject to security clearance,” said finance minister Nirmala Sitharaman in New Delhi.
In May 2001, India had opened the defence sector for private companies and they were allowed to bring foreign direct investment of up to 26% in the country, subject to licensing.
In 2016, the FDI limit in the defence sector was increased to 49% by Prime Minister Narendra Modi.
However, the cap of 49% proved an impediment as foreign defence companies were not allowed to have management control of the joint venture company.
According to the latest official data given by the government in Parliament in March this year, the country received foreign direct investment of Rs 1,834 crore ($241.8 million) in five years, 2014-2019 period.
FDI in Defence Sector remains a challenge
However, a bulk of this FDI amount, $218 million or over 90% of the total FDI investment of $241.8 million, was received in the last financial year (April 2018-March 2019).
The increase in FDI in Defence has been announced by finance minister Nirmala Sitharaman as a part of Prime Minister Narendra Modi’s ambitious self-reliant India campaign (Atma Nirbhar Bharat Abhiyan).
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