Centre relaxes FDI norms for aviation and defence sectors

The central government has relaxed foreign direct investment (FDI) norms for the aviation and defence sectors. In the aviation sector, foreign investors, barring overseas airlines, have been permitted to hold 100 per cent stake in domestic scheduled air transport and regional air transport services. The new set-up allows 49 per cent FDI through the automatic route, while for anything higher, government approval will be required. For non-resident Indians, 100 per cent FDI will continue to be allowed under the automatic route. Maintaining the status quo, foreign airlines will be allowed to invest only up to 49 per cent in local carriers. With regard to airports, 100 per cent FDI in brownfield projects through the automatic route has been permitted. In defence, foreign investment beyond 49 per cent (and up to 100 per cent) has been permitted through the government approval route for cases resulting in import of modern technology from other countries. The “state-of-the-art” technology clause for FDI over the 49 per cent limit has been dropped. The FDI limit for the defence sector has also been made applicable to the manufacturing of small arms and ammunitions covered under the Arms Act, 1959.