Govt initiates exercise to raise FDI in defence sector to 100%

Tags: News
In a major policy initiative, the government is proposing to raise FDI in defence sector to 100 per cent through the approval route.

"The Commerce and Industry ministry has circulated a Cabinet note for inter-ministerial consultation," sources told PTI.

The proposal to raise FDI cap in defence from 26 per cent to 100 per cent is aimed at giving a boost to the manufacturing activities.

As per the 15-page Cabinet note, which was circulated today, portfolio investors, including FIIs, would be permitted to invest only up to 49 per cent.

Further, the note said that a foreign company can even take over a domestic entity provided it brings in state-of-the art technology.

This is the first major initiative of the ministry after new Commerce and Industry minister Nirmala Sitharaman took charge this week.

Sources said that permitting FDI in the sector "will hugely help in reducing import bill for defence equipment, will help in boosting manufacturing and creating jobs".

The UPA government had pegged FDI in the defence sector at 26 per cent but allowed Cabinet Committee on Security (CCS) to approve proposals entailing higher investments.

In May 2010, DIPP had rolled out a discussion paper suggesting increase in FDI cap for the defence sector.

India opened up the defence equipment industry to private sector in May 2001, but restricted foreign participation to 26 per cent in this capital-intensive and sensitive sector.

India is one of the largest defence importers in the world with a minuscule component of exports.

It ranks among the top ten countries in the world in terms of military expenditure. India at present imports over $ 8 billion worth of defence equipment and its defence budget is growing at an average of 13.4 per cent annually since 2006-07.

"The bulk of the domestic production is met either through the Ordnance Factories or the Defence PSUs. Even when defence products are manufactured domestically, there is a large component of imported sub-systems," DIPP had said.


  • India can increase its GDP by letting women take as much part as men in the economy

    Women hold up half the sky. So said Mao Zedong. Now, McKinsey Global Institute (MGI) tells us that they can hold up more than half the sky.


Stay informed on our latest news!


Sarthak Raychaudhuri

vice-president, HR, Asia South Whirlpool of India

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs


Amita Sharma

Rank disorder in higher education

Two Indian institutes count among the wo­rld’s top 200 in ...

Zehra Naqvi

Little known gems

Fame, as they say, is a fickle mistress. And all ...

Bubbles Sabharwal

Harmony is a work in progress

Things, events, feelings, people... nothing has value attached to it, ...


William D. Green

Chairman & CEO, Accenture