What is the percentage of Foreign Direct Investment allowed in the defence sector under automatic route?

The correct answer is 0.74.

Key Points

• 74% Foreign Direct Investment (FDI) is allowed in the defence sector under the automatic route in India.
• FDI beyond 74% is permitted but requires government approval, subject to access to modern technology or for other reasons.
• The decision to increase FDI in the defence sector was made to attract investment and boost the Make in India initiative in defence manufacturing.
• The relaxation in FDI norms aims to facilitate the establishment of joint ventures, encourage technology transfer, and strengthen India's defence capabilities.
• This policy helps enhance self-reliance and reduces dependency on defence imports, promoting India as a global defence manufacturing hub.

Additional Information

• Automatic Route:
  • Under the automatic route, foreign investors do not need prior approval from the government or the Reserve Bank of India (RBI) to invest in specified sectors.
  • This is intended to simplify the investment process and attract more foreign capital to India.
• Defence Production Policy:
  • The Defence Production and Export Promotion Policy (DPEPP) 2020 aims to achieve a turnover of ₹1.75 lakh crore (US$25 billion) in defence manufacturing by 2025.
  • It focuses on achieving self-reliance through indigenization and promoting export-oriented defence production.
• Make in India Initiative:
  • Launched in 2014, this initiative seeks to transform India into a global manufacturing hub.
  • It emphasizes reducing imports and promoting indigenous production in key sectors, including defence, electronics, and automobiles.
• FDI in Critical Sectors:
  • In addition to defence, FDI is permitted in sectors like telecommunications, pharmaceuticals, and aviation to boost investment and growth.
  • Each sector has specific caps and conditions for FDI, depending on its strategic importance.