FDI in the defence sector will require security clearances1 min read . Updated: 18 Sep 2020, 10:23 AM IST
- All foreign Investments in the defence sector, including those currently allowed in the 74% by automatic route, will be subject to scrutiny on grounds of national security
- According to a new notification, the government reserves the right to review any foreign investment in the defence sector that affects or may affect national security
Foreign direct investment (FDI) in the defence sector will require security clearances, the government said in a notification on Thursday.
In May, the government had allowed foreign firms to directly invest up to 74% ownership in defence sector from an earlier cap of 49% in a bid to speed up investments into the manufacturing of military hardware and armaments as India was emerging from one of the strictest lockdowns imposed to slow the transmission of covid-19. The announcement—made by Finance Minister Nirmala Sitharaman in May—had made it clear that beyond 74%, investments would be under the government route wherever it is likely to result in access to modern technology.
However, the government’s notification issued late Thursday said: "Foreign Investments in the defence sector shall be subject to scrutiny on grounds of National Security and Government reserves the right to review any foreign investment in the defence sector that affects or may affect national security."
It was not clear immediately as to what prompted the government to bring in the notification stipulating the new condition.