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Government notifies hike in FDI limit to 49% in defence sector

27 Aug 2014 Evaluate

In a move aimed at boosting domestic industry, which imports up to 70% of its military hardware, the government on Tuesday notified the increase in foreign direct investment (FDI) limit to 49% in the defence sector through approval route. However, FDI ceiling in the defense sector has been hiked from the present 26% on the condition that the company seeking permission for hiking its FDI to 49% should be an Indian company, owned and controlled by resident Indian citizens, according to the press note of the Department of Industrial Policy and Promotion (DIPP).

However, for proposals involving foreign direct investment above 49%, the companies will have to seek the approval of the Cabinet Committee on Security on 'case to case basis', wherever it is likely to result in access to modern and state of the art technology in the country.

Also, the government clarified that FDI limit of 49% was composite and included all kinds of foreign investments - FDI, FIIs, FPIs, NRIs, foreign venture foreign venture capital investors (FVCIs) and qualified foreign investors (QFIs). Further, it highlighted that portfolio investments by FPIs/FIIs/NRIs/QFIs and investments by FVCIs together would not exceed 24 per cent of the total equity of the investee/joint venture company. 'Portfolio' investments will be under automatic route.

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