The government on 18 September issued Press Note 4 of 2020 to increase the foreign direct investment (FDI) limit in India’s defence sector to 74% from 49% under the automatic route. The liberalized FDI limit is intended to permit foreign investment into companies seeking a new industrial licence only and is subject to the prescribed FDI-linked conditions under this press note.
In May 2020, the government as part of an economic stimulus package in response to the covid-19 pandemic, announced a proposal to liberalize the FDI framework for the defence sector. The government outlined its intention to permit foreign investors to hold up to 74% of the equity share capital of Indian companies engaged in activities falling within the defence sector under the automatic route (i.e., without prior government approval), potentially paving the way for foreign companies to hold a majority controlling stake in such Indian companies.
Following this announcement, the government issued Press Note 4 of 2020, on 17 September, to amend India’s consolidated FDI policy. The press note will take effect on an amendment being made to India’s exchange control framework by way of a notification to be issued under the Foreign Exchange Management Act, 1999.
Preliminary analysis
The proposed liberalization of the FDI policy for defence manufacturing is a welcome move and could attract large-scale investments by foreign defence majors in the sector, thereby adding significant momentum to the government’s Make in India programme.
You must be a
subscribersubscribersubscribersubscriber
to read this content, please
subscribesubscribesubscribesubscribe
today.
For group subscribers, please click here to access.
Interested in group subscription? Please contact us.
你需要登录去解锁本文内容。欢迎注册账号。如果想阅读月刊所有文章，欢迎成为我们的订阅会员成为我们的订阅会员。
This update was prepared by the Trilegal News Desk. The team can be reached at alerts@trilegal.com.
