Govt notifies FDI changes; redefines 'control' under FEMA

The government today notified the recent relaxations made in sectoral foreign direct investments (FDI) caps under Foreign Exchange Management Act (FEMA). In addition, the stricter definition of 'control', for FDI policy, was also notified, reports CNBC-TV18'S Rituparna Bhuyan.

The notification has specified the fine print for FDI in defense. Prospective investors in the defense sector will have to adhere to 20 guidelines. However,  none of these 20 guidelines specify what constitutes state-of-the-art, but these rules give a commitment that within 10 weeks, the companies will be told if their application has been accepted or not.
Some of these conditions are, for example, transfer of equity between a non-resident and a non-resident where the lock-in period of three years will remain. Furthermore, even even after three years if there is a transfer of equity between a non-resident and a non-resident, it will require government approval.
The ministry of defence (MoD) does not give any guarantee of whatever arms or ammunition is produced if it will be procured by the MoD. However, the rules go on to say that whatever arms and ammunition gets produced will only have to be produced for the MoD.
So, we will now have to wait and see big companies like Lockheed Martin or Boeing and if their business plans are in sync with these rules on defence FDI notified today.