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Defence Sector - Shanmugam IAS academy in coimbatore
Defence Sector


What’s in news?

Information about the Relaxation of Foreign Direct Investment (FDI) norms in Defence Sector was given in the Rajya Sabha.

Key data’s:

  • Given by: The information about the Relaxation of Foreign Direct Investment (FDI) norms in Defence Sector was given by the Shri. Rajnath Singh, Union Defence Minister.
  • In 2001, along with the public sector, the Defence Industry sector was opened upto 100% for Indian private sector participation, with FDI upto 26% both subject to licensing.
  • Extension of FDI: Further, Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry has allowed FDI under through the following routes;
    • Upto 49% through automatic route
    • Above 49% through government route
  • Further, FDI in defence industry sector is subject to industrial license under Industries (Development & Regulation) Act, 1951 and manufacturing of small arms and ammunition under the Arms Act, 1959
  • FDI inflows: So far upto December, 2019 the FDI inflows in Defence and Aerospace sectors were as follows;
    • FDI inflows of over Rs. 3155 crores have been reported in this sectors.
    • FDI inflows of over Rs. 1834 crores have been reported in this sector after 2014.
  • Other conditions: The other conditions governing FDI Policy in this manufacturing sector as;
    • Infusion of fresh foreign investment within the permitted automatic route level, in a company not seeking industrial licence, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval.
    • License applications will be considered and licenses given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence and Ministry of External Affairs.
    • Foreign investment in the sector is subject to security clearance and guidelines of the Ministry of Defence.
    • Investee Company should be structured to be self-sufficient in areas of product design and development. The investee/joint venture company along with manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India.

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