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In a decision having far-reaching consequences, the Union Cabinet on Wednesday night decided to allow private sector participation in the defence sector.
This was just one among several major decisions taken by the Union Cabinet in its meeting on Wednesday to attract fresh foreign investment.
Briefing mediapersons after a meeting of the Union Cabinet, Parliamentary Affairs Minister Pramod Mahajan said that private companies would be given licences to manufacture certain items, which would be notified later, for the defence forces.
While Public Sector Undertakings would continue to supply equipment to the armed forces, this is for the first time in the history of independent India that 100% private sector participation would be allowed in the manufacture of defence equipment, Mahajan said.
The government would even permit up to 26% Foreign Direct Investment in such companies, he added.
Among the other major decisions, the Union Cabinet approved of 100% FDI in airports, courier companies, drugs and pharmaceutical companies, tourism and hospitality industry and township development while raising the limit in the telecom sector to 74% and in banking to 49%.
The decision pertaining to the telecom sector would be subject to approval by the Foreign Investment Promotion Board and that in the banking sector, subject to Reserve Bank of India regulations, Mahajan said.
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