FDI in Defence

Subject: Economy

Context:

The Union Cabinet approved the new FDI policy in the Defence sector which allows the foreign direct investment through automatic approval to be increased from 49% to 74%. However, the new policy has a ‘National Security’ clause as a condition

Concept:

• Foreign Investment in the Defence Sector shall be subject to scrutiny on the ground of National Security and the Government reserves the right to review any foreign investment in the Defence Sector that may affect national security
• The policy has been introduced in view of reducing dependency on imports in the Defence sector and boosting Make in India, in turn giving more employment and business opportunities to the Indian businesses and boosting self-dependency.
• Through the policy reforms, the government is seeking to attract foreign players to set up manufacturing units in India.
• The Government has been focussing on strengthening the Defence sector by boosting indigenous manufacturing and also aiming to increase exports from the sector.