Industry Largely Welcomes, Experts Cautious On Hiked FDI In Defence

NEW DELHI: India's manufacturing sector largely welcomed the government's decision to hike FDI in the defence sector to 49 percent but security experts said this was not enough to attract the big players.

Industry lobby CII welcomed the hike from 26 percent to 49 percent with full Indian management and control, saying it was a "historic moment" for the industry to collaborate with foreign Original Equipment Manufacturers (OEMs) and "create state of the art platforms and solutions", within the country.

"This would definitely encourage MNCs to get into co-development and co-production arrangements with Indian companies," Confederation of Indian Industry director general Chandrajit Banerjee said.

The cabinet Wednesday evening decided to hike the cap in the defence sector, that has an allocation of $38 billion for this fiscal, a move that can potentially help India curb its import bill on military hardware, 70-75 percent of which is sourced from overseas.

This was in keeping with Finance Minister Arun Jaitley's commitment during his budget speech July 10.

Noting that capital and technology are the two important aspects of advanced manufacturing, Banerjee said that with the hike, the Indian government "has made its intentions clear to the world that we mean business".

"Development of technologies in India would also mean that Intellectual Property Rights can reside in India," Banerjee added.

CII deputy director general Sujith Haridas pointed out that many items in the defence sector had already been delicensed and that 100 percent FDI was already permitted.

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