Union Government Approved Amendment to FDI Policy in Defence Sector

The union Government of India have approved Foreign Direct Investment (FDI) of 74%. This FDI has been allowed under the automatic route in defence sector. This will attract more overseas investors in the defence industry. This announcement was made by the Department for Promotion of Industry and Internal Trade (DPIIT)

Background

  • Government of India has permitted 100% foreign investments in the defence sector, until now.
  • 49% were allowed under automatic route.
  • Above 49% FDI was allowed through the government’s approval.

What has changed now?

49% share under the automatic route has been increased to 74%.

Other reforms in Defence Sector

Under the Atma Nirbhar Bharat Abhiyaan, government of India introduced following reforms in the defence sector:

  1. For indigenous weapon procurement, a separate capital budget has been allocated.
  2. Ordnance factory board (OFB) has been corporatized.
  3. A negative list of defence equipment has been created that put some restrictions on the import of equipment’s.

What is the Need of such reforms?

It will make India self-Reliant in defence procurement. The reforms would also help India to increase its defence Exports.

Key Facts to remember

  • India is the third largest country in the world in terms of allocating the defence budget.
  • India is having the second largest armed force in the world.
  • OFB is the largest government-operated production organisation in the world.

Department for Promotion of Industry and Internal Trade (DPIIT)

The DPIIT was established in 1995 as Department of Industrial Policy & Promotion (DIPP).  It was named as DPIIT on January 27, 2019. The department, under the Ministry of commerce and Industry, is responsible for formulation and implementation of promotional and developmental measures. These measures are required for the growth of the industrial sector.