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Home / Business / Foreign investments in defence will be subject to scrutiny: Piyush Goyal

Foreign investments in defence will be subject to scrutiny: Piyush Goyal

The permit for up to 74 per cent FDI through the automatic route was announced by finance minister in May while announcing the fourth tranche of the Rs 20 lakh crore stimulus package
A Rafale aircraft at the air force station in Ambala on Wednesday.

Our Special Correspondent   |   New Delhi   |   Published 19.09.20, 03:44 AM

The government’s decision to ease the FDI norms in the defence sector will push self-reliance in production and keep national interests and security paramount, commerce and industry minister Piyush Goyal said on Friday.

He said the foreign investments would be subject to scrutiny on the grounds of national security. The government has permitted 74 per cent foreign direct investment (FDI) under the automatic route in defence with certain conditions.

“Now, FDI is allowed up to 74 per cent through the automatic route and beyond 74 per cent to be permitted through the government (approval) route. This will enhance ease of doing business and contribute to growth of investment, income and employment,” Goyal said in a tweet.

“In line with our collective vision of Aatmanirbhar Bharat, amendments will enhance self-reliance in defence production, while keeping national interests and security paramount.”

The government has permitted foreign direct investment (FDI) of up to 74 per cent under the automatic route to attract overseas investors, according to a press note issued by the DPIIT.

However, the investments would be subject to scrutiny on the grounds of national security and the government reserves the right to review any foreign investment that affects or may affect national security, the department for promotion of industry and internal trade (DPIIT) said in the note.

At present, 100 per cent overseas investments are permitted in the defence industry — 49 per cent under the automatic route, while government approval is required beyond that level. 

The permit for up to 74 per cent FDI through the automatic route was announced by finance minister Nirmala Sitharaman in May while announcing the fourth tranche of the Rs 20 lakh crore stimulus package for the coronavirus-hit economy.

In July 2018, the government had relaxed the foreign direct investment norms in the defence sector by allowing up to 49 per cent FDI under the automatic route.

According to DPIIT data, defence industries have received FDI equity inflows of $9.52 million (Rs 56.88 crore) between April 2000 and March 2020. 

Under the government route, foreign investors have to take prior approval of the respective ministry/department, while in the automatic route, the investor just has to inform the RBI. 

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