Government To Add ‘National Security’ Clause In Defence FDI

New policy resulting in automatic approval in Defence Sector from 49 percent to 74 percent through Foreign Direct Investment (FDI) now decided to add ‘National Security’ clause in it.

On Tuesday, Union Cabinet approved the policy and according to new conditions, this new clause has been proposed by the Ministry of Commerce and Industry.

As per new conditions, “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.”

As per existing policy, government can bring in 49% FDI in defence sector under automatic route and “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 added in addition to existing four conditions mainly to defence manufacturing sector, including security clearance and some guidelines of the Ministry of Defence.

No specific reason has been put up for the introduction of National Security clause. Defence is a sensitive sector and government majoritly looking forward to see this sector as an engine to boost the manufacturing sector.

Government is looking forward to achieve a turnover of Rs 1.75 lakh crore, including exports worth Rs 35,000 crore, by 2025.