The Indian Government has decided to increase Foreign Direct Investment (FDI) in the defence sector to 100% from its existing 49%.
The earlier FDI regime permitted 49% FDI participation in the equity of a company under automatic route.
A statement posted on the Government of India Press Information Bureau website said more than 49% of foreign investment is now allowed through government approval route wherever it is likely to result in access to modern technology or for other reasons to be recorded.
FDI limit for defence sector is also applicable to manufacturing small arms and ammunitions covered under the Arms Act 1959.
The latest amendments will allow foreign companies to establish fully owned subsidiaries in India, according to DefenseWorld.net.
The changes will reportedly make it easier for foreign companies to do business in the country, therefore leading to larger FDI inflows that will in turn contribute to growth of investment, incomes and employment.
The government has also amended rules that are applicable to other sectors, such as food, pharmaceutical, civil aviation, single brand retail trading and animal husbandry.
The FDI policy will now include increased sectoral caps, while easing conditions for foreign investment.
Other reforms made by the government in the past two years increased FDI inflows to $55.46bn during financial year 2015-16.