Policy & Government

New clause added to regulate additional FDI in defence sector, says report

The newly approved government policy on raising the cap on foreign direct investment (FDI) through automatic approval in the defence sector now has a national security clause as a condition, reported The Indian Express. The report comes not long after the cabinet approved the hike of FDI cap in the defence sector from 49 to 74 percent.

“Foreign investment in the defence sector shall be subject to scrutiny on ground of national security and the government reserves the right to review any foreign investment in the defence sector that may affect national security,” says the new condition, that sources told the media, was proposed by the ministry of commerce and industry.

The new clause is significant as the current policy allows defence industries to bring FDI up to 49 percent under the automatic route, and above it under government route, the report added. The latter option can only be exercised when foreign involvement is likely to fetch significant gains such as access to advanced technology.

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