Foreign investment limit set to 74% for the defence sector: Ordnance factories to be corporatised

New Delhi: – The Union government has taken a major decision of increasing the cap on foreign investment, in the defence equipment manufacturing sector, from 49% to 74%. Prime Minister Narendra Modi had announced an economic package of ₹20 trillion to provide an impetus to the country’s economy. While revealing the details of the package, Finance Minister Nirmala Sitharaman made this announcement. At the same time, Sitharaman announced that the ordnance factories would be given a more professional look and they will be listed on the stock exchanges for increasing the investment in the ordinance factories. Defence Minister Rajnath Singh welcomed this decision saying that this announcement will bring a historic change.


On Saturday, Finance Minister Sitharaman made some important announcements regarding the defence, civil aviation, space and nuclear power sectors. Sitharaman has opened up the defence sector for foreign investments in line with the ‘Make in India’ and ‘Self Reliant India’ campaigns. Until now, foreign investments were capped at 49% in the defence sector. This limit has been raised to 74%. India is a major importer of defence equipment. With this decision to increase the limit of foreign investment, it is expected that this will make it attractive for international companies to invest in India. This decision becomes vital for encouraging the manufacturing of weapon systems and other defence equipment in the country.

Henceforth, the ordinance factories will be managed more professionally. Responsibilities will be fixed for delays and faults in the defence equipment supplied by these ordinance factories. Finance Minister Sitharaman announced that to attract more investments in the ordnance factories, they will be listed on the stock exchanges. Sitharaman clarified that increasing professionalism in the ordinance factories does not mean privatisation. Sitharaman said that this policy had been framed to ensure indigenous manufacturing of the defence equipment necessary for the Indian military.

Meanwhile, the airliners have to travel abroad for repairs and maintenance. Sitharaman said that to change this scenario, repairs and maintenance facilities will be developed in the country. Currently, only 60% of the airspace is used for passenger airliners. This will thus be increased. The passenger airliners have to take a detour because of airspace limitations. The new decision will save time and fuel. Sitharaman claimed that this would also result in a decrease in passenger fares.

The space sector in the country also has been opened up for the private sector. Private companies will be allowed to use the facilities of the Indian Space Research Organisation (ISRO). At the same time, Sitharaman informed that a more comprehensive policy would be adopted for the “Geospatial data”. Sitharaman said that Research Reactors for the manufacture of Medical Isotopes would be built under the Public-Private Partnership (PPP) model. Radiation technology will be used to increase the shelf-life of vegetables, fruits and other perishable items. Sitharaman said that a major decision to start a Food Security Department has been taken.

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