In 2016, the prevailing 26 per cent cap for foreign direct investment (FDI) in defence was raised to 49 per cent through the automatic route. Further, FDI above 49 per cent became permissible through case-by-case government sanction “wherever it is likely to result in access to modern technology or for other reasons to be recorded.”
That has failed to spur investment. The defence sector has received a total of $0.18 million (Rs 1.26 crore) in FDI from April 2014 to December 2017, the defence ministry said.
The study, conducted in partnership with UK consultancy firm BDO, suggests: “The government should allow a minimum of 51 per cent FDI in defence without any riders to linkages with ‘modern technology’, so as to enable international defence companies to exercise adequate control over joint venture companies, intellectual property rights and product quality.”
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