Politics · India Bureau
India explores relaxing FDI restrictions in defence manufacturing sector
The government is considering a liberalisation of foreign direct investment rules in the defence sector to attract greater overseas capital. The Department for Promotion of Industry and Internal Trade is conducting stakeholder consultations on potential regulatory changes.
LSN India ·
New Delhi is reviewing its foreign direct investment policy framework for the defence industry, with officials indicating that regulatory easing is under active consideration. The Department for Promotion of Industry and Internal Trade is engaging with key stakeholders to evaluate proposed modifications to existing FDI norms.
Under current regulations, foreign investors can commit up to 74 per cent equity through the automatic approval route. Beyond this threshold, foreign direct investment requires explicit government clearance, typically granted where it facilitates access to advanced defence technologies. All foreign investment in the sector remains subject to security vetting by the Ministry of Home Affairs and compliance with Defence Ministry guidelines.
The potential liberalisation comes as India seeks to expand its defence manufacturing base and strengthen technological capabilities. Between April 2000 and March 2026, the defence sector attracted USD 32.29 million in foreign direct investment, a figure the government aims to significantly increase through sectoral reforms.
The government has implemented numerous initiatives to boost domestic defence production in recent years, complementing efforts to modernise the armed forces. These measures align with the broader "Make in India" agenda and the country's strategic objective to reduce dependence on imported defence equipment while leveraging foreign expertise and investment.