"FPI/FII (through portfolio investment) in companies holding defence licence as on 22 August, 2013 will remain capped at the level existing as on the said date. "No fresh FPI/FII is permitted even if the level of such investment falls below the capped level subsequently," the latest compendium on FDI released by the Department of Industrial Policy and Promotion (DIPP) said.

In August last year, the government had banned investment by foreign portfolio investors (FPI/FII) in the defence sector.

As per the norms, foreign direct investment (FDI) is allowed up to 26 percent in the defence sector. However, the guidelines also provided for higher FDI limits in 'state-of-the-art' technology manufacturing with approval of the Cabinet Committee on Security.

"The DIPP has only clarified about FPI/FII limits in the new compendium and incorporated all the changes made during the course of the year," an official source said.

In 2013, the government had relaxed foreign investment norms in about a dozen sectors including telecom, petroleum refining, multi-brand retail and civil aviation. Those steps were announced to promote foreign investment boost the sagging economy. The GDP growth has touched a decade low of 4.5 percent in 2012-13.

PTI