India to ease rules to boost FDI in domestic defence firms

Cap under automatic route to be lifted to 74%, write Nikunj Ohri and Sarita Chaganti Singh

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Indian Air Force HAL Tejas and Sukhoi Su-30 fighter jets perform during the inaugural day of the 15th edition of 'Aero India 2025', a military aviation exhibition at the Yelahanka Air Force Station in Bengaluru, on Feb 10, 2025.

(AFP)

India plans to make it much easier for foreign firms to invest in defence companies, two government sources with knowledge of the matter said — a move that would align with efforts to boost domestic manufacturing after last year’s conflict with Pakistan.

The cap on foreign direct investment in defence firms with existing licences under the so-called automatic route, where government approval is not required, is set to be raised to 74% from 49%, the sources said.

Presently, foreign investors can only own 74% of an Indian defence business under the automatic route when the companies are seeking new licences.