India Defence FDI Rules: India is getting ready to change its rules to allow more foreign money into defence companies. This is meant to help build more defence equipment inside the country. A Reuters report said this plan is based on information from two government sources who know about the matter.
Under the new plan. The limit for foreign direct investment may go up. Right now foreign investors can own up to 49% in defence companies with existing licences under the automatic route. The automatic route means no government approval is needed. The government is now planning to raise this limit to 74%. At present this 74% limit is only allowed when companies apply for new defence licences.
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The government is also thinking about removing an old rule linked to foreign ownership above 74%. At the moment higher ownership is allowed only if it brings “modern technology” into India. Many experts have said this rule is unclear and confusing. Because of this companies often do not know what qualifies as modern technology.
The new changes are meant to let foreign defence companies own most of their Indian businesses. This could help attract firms from friendly countries. According to the sources. These reforms could be put in place in the next couple of months. India’s trade ministry and defence ministry did not reply to questions about this plan.
Export Rules and Low Foreign Investment
The Reuters report also said the government is reviewing another rule. This rule forces defence companies that only export products to set up maintenance and support centres in India. The government may remove this condition. Officials believe this will make it easier for export-focused companies to invest.
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“This condition forced companies to first set up maintenance bases, which can now be outsourced by export-oriented units, making it easier for them to attract foreign investment,” said Amit Cowshish, a former defence ministry official.
Many global defence companies already work in India through partnerships or joint ventures. These include Airbus from France. Lockheed Martin from the United States. And Rafael Advanced Defense Systems from Israel. India also has strong defence ties with Russia. Still foreign investment in India’s defence sector has stayed very low. Government data shows only $26.5 million came into defence out of total foreign inflows of $765 billion over the last 25 years till September 2025.
