The government has proposed to raise Foreign Direct Investment (FDI) in defence sector to 100 per cent. According to sources, the Commerce and Industry Ministry has circulated a Cabinet note for inter-ministerial consulatation. The proposal to raise FDI cap from 26 to 100 per cent is aimed at giving a boost to manufacuring activities. However, portfolio investors including Foreign Institutional Investors will be allowed to invest only upto 49 per cent.A foreign company can even take over a domestic firm if it brings in state-of-the-art technology. India opened up defence equipment industry to private sector in early 2001 but had restricted foreign participation to 26 per cent.