What is the permissible limit of foreign direct investment in India’s defence industry through the government route?

Correct option is D

Correct Answer: (d) 100 percent

Explanation:

• According to the FDI Policy in the Defence Sector (revised in 2020), Foreign Direct Investment is allowed up to 74% under the Automatic Route.
• However, FDI beyond 74% and up to 100% is permitted through the Government Route (approval route). This higher limit is typically granted wherever it is likely to result in access to modern technology or for other reasons to be recorded.
  

Information Booster:

• Policy Change: The limit for the Automatic Route was raised from 49% to 74% in September 2020 to boost the "Make in India" initiative in defence production.
  
• Security Clearance: Investments in the defence sector are subject to security clearance by the Ministry of Home Affairs.
  
• Licensing: Defence industries are subject to industrial licensing under the Industries (Development & Regulation) Act, 1951.
  
• Nodal Department: The Department for Promotion of Industry and Internal Trade (DPIIT) formulates the FDI policy.
  

Additional Information:

• (a) 26 percent: This was the initial cap when the sector was first opened to FDI in 2001.
  
• (b) 51 percent: This is a standard threshold for majority ownership/control in many sectors but is not a specific boundary in the current defence FDI tiers (which are 74% and 100%).
  
• (c) 74 percent: This is the current limit permissible under the Automatic Route, where no prior government approval is required.