Govt working on guidelines to increase defence FDI to more than 49%

The government is working on guidelines for defence FDI proposals where foreign investment would be more than 49%.

At present, foreign direct investment (FDI) up to 49% is allowed under automatic route in the defence sector, while Foreign Investment Promotion Board's (FIPB) approval is required for proposals committing foreign investment beyond 49%.

A meeting on the formulation of guidelines was held in the Ministry of Defence earlier this week, sources said.

The guidelines would help facilitate foreign investments for beyond 49% shareholdings, they added.

Last year, the government relaxed FDI norms in the defence sector by allowing FDI up to 49% under automatic route and beyond that through the FIPB's approval.

The development assumes significance as French defence major DCNS has approached the government with a 100% FDI proposal in the sector.

Although the government had liberalised the FDI cap in the sector, but no major overseas investment has been received in the segment so far.

The move would also help boost the domestic industry which imports up to 70% of its military hardware.