The Government of India on September 17, 2020 issued Press Note No. 4 of 2020 (“PN4”) revising the Foreign Direct Investment (“FDI”) policy governing the Defence sector. PN 4 contains the landmark decision to allow upto 74% FDI under the automatic route, announced by the Finance Minister in May, 2020 as a part of the Government’s economic package to stimulate the economy.
The earlier policy permitted Foreign Investment upto 49% under the automatic route in the Defence sector, and any Foreign Investment greater than 49% required Government approval. Further, where the proposed investment was to result in a “change in the ownership pattern” or involved a “transfer of stake by existing investor to new foreign investor”, Government approval was mandatory.
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