Centre gives green signal for increase in FDI in the defence sector!

The central government is considering further easing regulations on foreign investments in domestic defense companies. Government sources stated that, as part of measures to promote domestic manufacturing following last year’s confrontation with Pakistan, the government is positively inclined toward this move. Currently, under the automatic route where government approval is not required, foreign companies can invest up to 49% in licensed defense firms. The government is now planning to raise this limit to 74%.

This change would allow foreign companies to easily acquire a majority stake in India’s defense sector companies. At present, permission for up to 74% ownership is granted only when applying for new defense licenses. The new regulation will also apply to companies that already hold licenses. The move aims to attract larger investments in India’s defense sector from friendly countries. The new rules could be implemented in the coming months. It is notable that over the past 25 years, total foreign investment in India’s defense sector has been limited to just $26.5 million (approximately ₹240 crore).