India Plans Major Easing of Defence FDI Rules to Attract Global Investors
India is preparing to significantly relax foreign investment rules in its domestic defence sector, aiming to attract global manufacturers and strengthen local production, according to government sources. The proposed changes come as New Delhi seeks to boost self-reliance in defence manufacturing following last year’s deadly conflict with Pakistan and rising regional security concerns.
Under the planned reforms, the cap on foreign direct investment in defence firms with existing licences under the automatic route is expected to be raised to 74% from the current 49%, allowing foreign investors to take majority stakes without prior government approval. Authorities are also considering scrapping conditions that require investments above 74% to bring in “modern technology,” a clause long criticised for being vague and discouraging investors.
The government is additionally looking to drop requirements that export-focused defence manufacturers set up domestic maintenance facilities, making it easier for firms to outsource such services. Despite partnerships with companies like Airbus, Lockheed Martin and Israel’s Rafael, foreign inflows into India’s defence sector have remained limited. Officials hope the proposed reforms, which could be rolled out within months, will help boost investment, expand exports and support higher defence spending in the coming years.
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