The department of industrial policy & promotion (DIPP) has proposed a draft Cabinet draft that allows upto 100% of foreign direct investments in defence. This came in just two days after Nirmala Sitharaman took charge as the new commerce and industry minister.
In fact, defence minister Arun Jaitley had said that he would consider FDI in this sector.
Considered to be one of the most significant moves by the government to revive the manufacturing sector, where there was a dip in the output by 0.2% in the fiscal year ending March 31, 2014.
The department has proposed three different caps for defence-49 per cent, 75 per cent and 100 per cent, that will support technology transfer.
Furthermore, it has proposed 49% FDI in case of no technology transfer and 74% in case of a technology transfer. It has suggested that no-cap policy should be reserved for state-of-the-art technology. However, there still might be restrictions through the automatic route for security reasons.
Currently, just 26% FDI is allowed in defence manufacturing. BJP, in its manifesto had clearly stated that it would encourage FDI in all the sectors for asset and job creation.
Although, Amitabh Kant-DIPP secretary-remained tight-lipped, he had tipped earlier about the need and the advantages of FDI in the defence sector. He had said,"Defence is the centre for innovation and attracting technology and brings in the creativity of engineering."
Railways and Infrastructure
Government sources have confirmed that 100% FDI proposal in the railways, infrastructure and construction may also be cleared soon. Major policy decisions are in the pipeline and are likely to be read out in the budget.