Is Sovereign Guarantee Comfort An Enabler For Liberalisation Of Foreign Investment In The Indian Defence Sector?

India has been reaching new heights and milestones every year in the defence sector and, now more than ever, it has become crucial to strengthen the Indian defence sector by modernising the defence capabilities and reducing reliance on imports.

Since 2000, no substantial foreign investments have been made in the Indian defence sector, and due to the volatile nature of the defence industry, the need for cutting-edge technological development in defence mechanisms has become very important.

Under the Draft Defence Production Policy, 2018, there is a proposal to further liberalise foreign direct investment (FDI) in the defence sector permitting FDI upto 74% under the automatic route, in niche technology areas.

If the proposal is brought into effect, then foreign players would be able to acquire a controlling stake in an Indian entity engaged in niche technology areas in the defence sector without the approval of the Indian Government. Read More

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