FDI in defence up to 74%: Inflows subject to time-bound security clearances, say experts

FDI in defence up to 74%: Inflows subject to time-bound security clearances, say experts
However, the inflows are subject to time-bound security clearances and proper linkages with the government’s defence procurement procedures, feel some experts.

According to the newest policy, approved last week by the cupboard , FDI will now be allowed beyond 49 per cent to 74 per cent under the automated route.
The recently notified policy for foreign direct investment (FDI) in India’s defence sector may usher in more investments and fresh technology. However, the inflows are subject to time-bound security clearances and proper linkages with the government’s defence procurement procedures, feel some experts.

According to the newest policy, approved last week by the cupboard , FDI will now be allowed beyond 49 per cent to 74 per cent under the automated route. Investment through the govt route are going to be allowed beyond 74 per cent in cases where such FDI is “likely” to end in access to modern technology or where such an investment above the new automatic route is required for “other reasons” to be recorded.

“This will enhance simple Doing Business and contribute to growth of investment, income and employment,” Minister of Commerce and Industry Piyush Goyal tweeted on Friday, following the event .

Foreign investment within the sector is “subject to security clearance by the Ministry of Home Affairs” and shall be as per guidelines of the Ministry of Defence, consistent with a press note by the Department for Promotion of Industry and Internal Trade that was notified late on Thursday.

“Major defence firms in countries like Israel, the US, France and Russia are expecting clarity on this FDI policy, which might now give them wider access to controlling even the technology they carry in,” said Atul Pandey, a partner in Khaitan & Co. “They will now be looking to take a position in India,” he said. While the revised FDI policy within the defence sector allows scrutiny of “any” investments within the sector which will affect national security, Pandey feels that the clause may have limited impact for the nonce .

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