FDI in Defence Sector in India

% of Equity/ FDI Cap
Entry Route
Defence Industry subject to Industrial license under the Industries (Development & Regulation) Act, 1951
Automatic up to 49%

Above 49% under Government route on case to case basis, wherever it is likely to result in access to modern and ‘state-of-art’ technology in the country.

Other Conditions
(i) Infusion of fresh foreign investment within the permitted automatic route level, in a company not seeking industrial license, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval.
(ii) Licence applications will be considered and licences given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence and Ministry of External Affairs.
(iii) Foreign investment in the sector is subject to security clearance and guidelines of the M/o Defence.
(v) Investee company should be structured to be self-sufficient in areas of product design and development. The investee/joint venture company along with manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India.

Reference: Clause 5.2.6 of the Consolidated FDI Policy Circular of 2016 (D/o IPP F. No. 5(1)/2016-FC-1 Dated the June 07, 2016) issued by Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India.