What's New :
History Foundation 2022 (Batch - 6): Batch will be started from 10th December, 2021
Public Administration Foundation 2022 (Batch - 7), New Batch will be started from 13th December, 2021
Political Science Foundation 2022 (Batch-4), Batch will be started from 09th Dec, 2021
IAS Foundation 2023-24: New Batch will be started from 14th December, 2021

FDI in Defence Sector in India: An Analysis

  • Category
    Economy
  • Published
    13th Dec, 2018
  • The Defence Sector in India, being a strategic sector, was traditionally reserved for the Public Sector till 1991. Defence Public Sector Undertakings (Defence PSUs) and Ordnance Factory Board (OFB) monopolised defence products manufacturing while R&D was the exclusive turf of DRDO.
  • The concept of FDI in general was introduced in India in 1991 with the opening of the Indian economy. However, the Defence Sector was opened up 100% in May 2001 for Indian Private Sector participation with FDI permissible up to 26%, both subject to licensing.

Issue

Background

Evolution of FDI in Defence Sector

  • The Defence Sector in India, being a strategic sector, was traditionally reserved for the Public Sector till 1991. Defence Public Sector Undertakings (Defence PSUs) and Ordnance Factory Board (OFB) monopolised defence products manufacturing while R&D was the exclusive turf of DRDO.
  • The concept of FDI in general was introduced in India in 1991 with the opening of the Indian economy. However, the Defence Sector was opened up 100% in May 2001 for Indian Private Sector participation with FDI permissible up to 26%, both subject to licensing.
  • In August 2014, the Department of Industrial Policy and Promotion (DIPP) raised the limit up to 49% through Government route and above 49% through Cabinet Committee on Security (CCS), on case-to-case basis.
  • The Government formulated a revised “Consolidated FDI Policy” in 2016, where the policy permitted FDI cap in defence, through automatic route up to 49% and above 49% under Government route on case to case basis, wherever it is likely to result in access to modern and “state-of-the-art” technology in the country.
  • The Government further raised FDI cap to 100% on again in 2016. The phrase state-of-the-art was dropped for FDI above 49%. The CCS approval was no more required. However, the process of approval itself will include the Ministry of Defence (MoD) and the Ministry of Home Affairs (MHA) which will consider issues related to defence of the nation, internal security and every other matter which relates to the national security.
  • The requirement of single largest Indian ownership of 51% of equity has also been removed. A lock-in period of three years on equity transfer has been done away with in FDI for defence.
You must be logged in to get greater insights.
X
Enquire Now