Monday, June 02, 2014: Taking a major policy initiative, the government is now planning to increase the FDI in the Indian defense sector up to the level of 100 per cent. The government is proposing the raise through the approval route.
According to a PTI report, sources said that the commerce and industry ministry has already circulated a Cabinet note for inter-ministerial consultation. Currently, FDI allowed in defence sector is 26 per cent. The idea of raising the level to 100 per cent aims to boost the manufacturing activities in the country.
The 15-page Cabinet note states that the portfolio investors, including FIIs, will be given the permission to invest only up to 49 per cent. The Cabinet not stated that a foreign company will be entitled to take over the domestic entity if it brings in state-of-the art technology. This is the significant step to boost the manufacturing in the sector, taken by the new Commerce and Industry minister Nirmala Sitharaman. Sitharam took charge of the job this week.
If approved, the 100 per cent FDI in defense sector will “help in reducing import bill for defence equipment, will help in boosting manufacturing and creating jobs,” said the sources quoted by PTI. It is noteworthy that the previous UPA government had allowed 26 per cent FDI in this sector but also permitted the Cabinet Committee on Security (CCS) to approve proposals entailing higher investments. India, being one of the largest defence importers in the world, has only a minuscule component of exports.
