Foreign Direct Investment (FDI) in the defence sector of India through the automatic route now gets a “National Security” clause to it.
All FDIs in the said sector will now be subjected to scrutiny on the ground of “National Security” as well apart from the existing four other grounds which are specific to FDI in the defence manufacturing sector.
The decision, believed to have been proposed by the Ministry of Commerce and Industry, was reportedly approved by the Union Cabinet on Tuesday.
The new condition, as reported by The Indian Express, says, “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.”
Under the existing policy, the defence sector can attract FDI up to 49% under the automatic rate and more than that “under government route, wherever it is likely to result in access to modern technology or for other reasons to be recorded.”
However, in May, Finance Minister Nirmala Sitharaman had announced about raising the FDI limit in the defence sector through the automatic route to 74%.
Recently, PM Modi had also said that the country was making dedicated efforts to boost defence production.