MoD | Status on FDI in Defence Sector


PIB News Update: Raksha Rajya Mantri Shri Shripad Naik  has informed that In May, 2001, the Defence Industry sector, which was hitherto reserved for the public sector, was opened upto 100% for Indian private sector participation, with Foreign Direct Investment (FDI) upto 26% both subject to licensing.  Further, Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry vide Press Note No. 5 (2016 Series), has allowed FDI under automatic route upto 49% and above 49% through government route wherever it is likely to result in access to modern technology or for other reasons to be recorded.  Further, FDI in defence industry sector is subject to industrial licence under Industries (Development & Regulation) Act, 1951 and manufacturing of small arms and ammunition under the Arms Act, 1959. By allowing higher FDI  in the Defence sector, the global companies having high-end technologies can be encouraged to set up their manufacturing base in India in collaboration with Indian companies, thereby resulting in creation of employment opportunities, saving of foreign exchange and increasing indigenization.  FDI is one of the sources available for the industry to access some of the technologies required to indigenously design, develop and produce the equipments, weapon systems/platforms required for defence.  As per the data furnished by 37 companies operating in Defence and Aerospace sector, so far, FDI inflows of over Rs 1,561 crore have been reported in defence and aerospace sector after 2014 under automatic route.

The Government reviews the FDI policy in all sectors including defence on an ongoing basis and makes changes from time to time, to ensure that India remains an attractive & investor friendly destination.  It has been the endeavour of the Government to put in place an enabling and investor friendly FDI policy.  The intent is to make the FDI policy more investor friendly and remove the policy bottlenecks that have been hindering investment inflows into the country.

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