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UNION GOVT APPROVES AMENDMENT IN FOREIGN DIRECT INVESTMENT POLICY IN DEFENCE SECTOR

UNION GOVT APPROVES AMENDMENT IN FOREIGN DIRECT INVESTMENT POLICY IN DEFENCE SECTOR

Context

The Union Government has approved the amendment in Foreign Direct Investment Policy in Defence Sector.

Details

  • FDI is allowed up to 74% through automatic route and beyond 74% to be permitted through government (approval) route.
  • According to the Department for Promotion of Industry and Internal Trade data, defence industries have received FDI equity inflows of USD 9.52 million (₹56.88 crore) during April 2000 and March 2020.

Significance of the decision

  • It will enhance ease of doing business and contribute to growth of investment, income and employment.
  • The decision is In line with the vision of Aatmanirbhar Bharat and this  will enhance self-reliance in defence production, while keeping national interests and security paramount.

What do you mean by Foreign direct investment (FDI)?

  • Foreign direct investment (FDI) is when a company takes controlling ownership in a business entity in another country. With FDI, foreign companies are directly involved with day-to-day operations in the other country.
  • Under the government route, foreign investors have to take prior approval of the respective ministry/department, while in the automatic route, the investor just has to inform the Reserve Bank of India after the investment is made.

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