GoI permits up to 74% FDI under automatic route in Defence Sector

September 18, 2020

On September 17, 2020, the Government of India permitted Foreign Direct Investment of 74 percentage under automatic route in defence sector. This is being done to attract more overseas investors in the defence industry.

Highlights

Till date, the Government of India has permitted 100% foreign investments in the defence sector. Of this 49% were allowed under automatic route and above this an approval from the government was required. Now the share of this automatic route has been increased to 74%. The announcement of this decision was made by the department for promotion of industry and internal trade (DPIIT).

DPIIT

The DPIIT was established in 1995 as DIPP.  DIPP is Department of Industrial Policy and Promotion. The following programs and schemes are being implemented by DPIIT

  • Transport subsidy scheme: It was launched in 1971 to develop industrialisation in inaccessible areas, hilly areas and remote areas. The scheme has been discontinued since 2016.
  • North East Industrial and investment promotion policy: this was introduced in 2007.
  • North East Industrial Development Scheme: The scheme was initiated in April 2017 and to be implemented till 2022.
  • The Industrial Corridor projects in India are being implemented by DPIIT
  • The Geographical indication (GI) promotion activities are also taken up by DPIIT. So far the department has notified 370 GI applications as of August 2020.

Recent defence reforms in India

  • The Government of India has introduced several defence reforms under Atma nirbhar Bharat Abhiyan. Some of the reforms are as follows
  • a separate capital budget has been allocated for indigenous weapon procurement.
  • The ordnance factory board has been corporatized.
  • A negative list for the import of defence equipment in the country has been creator. In simple words a negative list is a ban on the imports.

Why the reforms?

Being the second largest armed forces in the world India aims to achieve self-Reliance in defence production. India also aims to increase its defence Exports as the country is the third largest in the world in allocating defence budget.

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