Prime Minister Narendra Modi on Thursday announced that his government has decided to allow 74% foreign direct investment in defence production through the automatic route. Modi said that the Centre aims to boost India’s self-reliance in the key sector.

FDI in India is allowed through two routes – automatic, where companies don’t require approval from the government; and government, where companies need the Centre’s approval.

Modi said that the government’s aim was to remove restrictions on the key sector. “Our effort in the last few years has been to break all the shackles associated with this [defence] sector,” Modi said at the Atmanirbhar Bharat Defence Industry Outreach Webinar. “Our aim is to increase production in India, develop new technology in India, and maximise expansion of private sector in defence production. Many important steps have been taken.”

The prime minister said that the Centre’s decision to ban the import of 101 military items will be extended to more equipment. “The government’s commitment to self-sufficiency in defense production is not limited to talks or papers,” Modi said. “One step has been taken for its implementation.”

Modi said that the government’s efforts were being directed to ensure increase in defence production, the development of new technology and the assignment of significant roles to private players.

The prime minister added that India had immense potential for defence production. “For many years, India has been one of the biggest defence importers,” Modi said. “An ecosystem of defence manufacturing has been established over 100 years but unfortunately, this sector did not get the required attention.”

Modi said that the government is speeding up work on the defence corridor. “State of the art infrastructure is being prepared in collaboration with the governments of Uttar Pradesh and Tamil Nadu,” Modi said. “For this, an investment target of Rs 20 thousand crore has been set in the coming 5 years.”

The prime minister had in May announced a Rs 20 lakh-crore financial package to tide over the economic fallout of the coronavirus pandemic. The prime minister had called for a self-reliant India based on the five crucial pillars of economy, infrastructure, system, demography and demand.