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Govt permits FDI of up to 74% under automatic route in defence sector
Sep-18-2020

The Department for Promotion of Industry and Internal Trade (DPIIT) in a note has said that the government has permitted foreign direct investment (FDI) of up to 74 percent under automatic route in the defence sector in order to attracting overseas investors. However, it said foreign investments in the defence sector would be subject to scrutiny on the grounds of national security and the government reserves the right to review any foreign investment in the sector that affects or may affect national security.

As per the current FDI policy, 100 percent overseas investments are permitted in the defence industry -- 49 percent under the automatic route, while beyond that government approval was required. According to the note, FDI up to 74 percent under automatic route shall be permitted for companies seeking new industrial licences. It also said that infusion of fresh investment up to 49 percent, in a company not seeking industrial licence or which already has government approval for FDI in defence, shall require mandatory submission of a declaration with the defence ministry in case change in equity/shareholding pattern or transfer of stake by existing investor to new foreign investor for FDI up to 49 percent, within 30 days of such change.

It further said the proposal for raising FDI beyond 49 percent from such companies will require government approval. It added that the decision will take effect from the date of Foreign Exchange Management Act (FEMA) notification.

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