SHARING KNOWLEDGE    CREATING NETWORKS

NEWS/ POLICY UPDATES

FDI in defence production hiked: Saab, Boeing, Lockheed Martin can fly higher in India

In a significant move, India on Saturday decided to further free up its foreign direct investment (FDI) policy by allowing up to 74% FDI in the defence manufacturing sector through automatic route, paving the way for global majors like Boeing or Lockheed Martin to hold controlling stakes in potential joint ventures.

Currently, although up to 100% FDI is allowed in defence, such investments beyond 49% require government approval, thus hampering the FDI inflows. The extant policy says the approval is required “wherever it is likely to result in access to modern technology or for other reasons to be recorded”. This has now become redundant for a global defence giants seeking to set up manufacturing base in India with controlling stake.

At the same time, in a push for indigenisation that has remained stunted for years, the government also announced that it will ban imports of a list of weapons that can be manufactured locally. Announcing these decisions, finance minister Nirmala Sitaharaman said separate budget provisions will also be made for domestic capital procurement in defence. The ordnance factories will be corporatised and listed later, so that their autonomy, accountability and efficiency improve.

Bharat Forge Managing Director Baba Kalyani lauded the government’s move. In an interview to CNBCTV-18, he called the indigenisation move a game-changer and wanted the Centre to follow up the decision by placing an order, initially to the tune of Rs 10,000 crore, to boost confidence. The country has the capacity to become a major exporter of weapons like artillery and small arms in the next five to seven years, he said