Government notifies increase in FDI cap to 49 per cent in defence sector through approval route

The government has notified increase in foreign direct investment (FDI) limit to 49 per cent through approval route in the defence sector.

FDI ceiling in the defence sector has been hiked from current 26 per cent, with the condition that the company seeking permission of the government for FDI up to 49 per cent should be an Indian company.

In the I&B sector where the sectoral cap is less than 49%, the company would need to be owned and controlled by the resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, according to the press note of the Department of Industrial Policy and Promotion ( DIPP).

Further, foreign direct investment proposals above 49 per cent will have to seek the approval of the Cabinet Committee on Security on "case to case basis, wherever it is likely to result in access to modern and state of the art technology in the country," stated the press note.

It also said that FDI limit of 49 per cent is composite and includes all kinds of foreign investments - FDI, FIIs, FPIs, NRIs, foreign venture foreign venture capital investors (FVCIs) and qualified foreign investors (QFIs).

However, portfolio investments by FPIs/FIIs/NRIs/QFIs and investments by FVCIs together will not exceed 24 per cent of the total equity of the investee/joint venture company. "Portfolio investments will be under automatic route," it added.

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