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In an effort to spur domestic manufacturing in the defense industry, Indian regulators have proposed relaxing restrictions for certain foreign direct investments (FDIs) in Indian domestic defense companies to promote investment in India.

Authors: I. Bobby Majumder Lynwood E. Reinhardt Brooke C. Dorris

On September 17, 2020, the Indian government formally proposed to increase the permitted ownership by non-Indian investors in Indian defense manufacturing companies without prior approvals from 49 percent to 74 percent in certain cases.

The Finance Ministry first announced this policy change in May, along with a series of changes to investment caps under India’s new US$266 billion stimulus package. The Department for Promotion of Industry and Internal Trade issued Press Note 4 this past week to confirm the FDI reforms specifically. The new regulations will become binding law once formal amendments are made to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.