Thursday, July 10, 2014: Opening the doors further for foreign investors in the defence sector, Arun Jaitly, the finance minister of India said that the level of FDI (Foreign Direct Investment) to 49 per cent from the existing 26 per cent. However, the government plans to keep the management control in domestic hands, asserted the minister, while presenting the Union Budget 2014 before the Parliament today.
In one of the first announcements made while presenting the budget, Jaitley said that India is the largest buyer of defence equipments. The increase in FDI in the sector will be helpful to increase the domestic capacity.
This decision from the government is completely in line with the promises that the party made during their election campaign, where it said that it would work to boost domestic defence industrial manufacturing.
It is worth mentioning that industry bodies like the Confederation of Indian Industry (CII) had urged for restricting FDI in defence to 49 per cent. However, they said that an exception can exist if anything above this is considered on a case-to-case basis.
However, the move has got a severe opposition from engineering majors like Larsen & Toubro, that has made significant investments in the sector. The company asserts that the move will not be in the national interest.
In an interview to ET, L&T chairman AM Naik, said, “We should agree to 49 per cent, subject to genuine transfer of technology. But nowhere in the world, even in the most advanced nations like the US, where they have in a hi-tech defence sector, do they allow foreign companies to own a majority stake.”
