India announces liberalisation of FDI in several sectors, defence kept protected

India has liberalised foreign direct investment (FDI) rules in several industry sectors but has stopped short of lifting the cap in defence.

New Delhi announced on 14 September that the FDI limits in civilian aviation, retail and broadcasting had all been increased to attract investment and invigorate the country's flagging economy.

The FDI reforms, which had stalled due to political opposition, enable foreign companies to own up to 49 per cent in Indian civil aviation companies; 51 per cent and 100 per cent in multi-brand and single-brand retail establishments; and up to 74 per cent in broadcasting.

However, proposals to increase the FDI limit in defence production did not win approval, apparently in response to continuing concerns within the Ministry of Defence (MoD). Anand Sharma, Minister of Commerce and Industry, told the Times of India: "The issue has been discussed and the defence ministry has some concerns. We will wait until the defence ministry agrees to it."

Although several government ministries have supported bids to increase the defence FDI limit, the MoD's primary concerns relate to national security and local industry's capacity to absorb the influx of military technologies that easing the FDI limit is likely to stimulate.