National Security Clause in Defence FDI

  • The new policy raising the cap of foreign direct investment through automatic approval in the defence sector from 49 per cent to 74 per cent now has a ‘National Security’ clause as a condition.
  • The policy was approved by the Union Cabinet.
  • The new condition has been proposed by the Ministry of Commerce and Industry.
  • Foreign investment in the Defence Sector shall be subject to scrutiny on ground of National Security and
    • The Government reserves the right to review any foreign investment in the Defence Sector that may affect national security.
  • Under the existing policy, the defence industry can bring FDI up to 49 per cent under the automatic route, and above it “under government route, wherever it is likely to result in access to modern technology or for other reasons to be recorded”.
  • The national security clause including security clearance and some guidelines of the Ministry of Defence.
  • The government has been focusing on the defence sector to act as an engine for boosting manufacturing in the country, and is aiming to achieve a turnover of Rs 1.75 lakh crore, including exports worth Rs 35,000 crore, by 2025.