Govt raises FDI limit in defence production to 74% from 49%
Finance minister Nirmala Sitharaman said the government will also put out a list of weapons and platforms that will only be purchased from domestic industries and not from foreign vendors
PremiumNEW DELHI : The government on Saturday announced a slew of measures to promote indigenisation of defence production under its 'Make in India' initiative, including raising the foreign direct investment (FDI) cap from 49% to 74% via the automatic route.
Unveiling the measures, Finance minister Nirmala Sitharaman said the government will also put out a list of weapons and platforms that will only be purchased from domestic industries and not from foreign vendors. This list will be expanded every year in consultation with the armed forces, she said.
Sitharaman also announced the corporatisation of the ordnance factory boards that have potential but seems to produce substandard products including shells for artillery. Corporatisation, however, does not mean privatisation, the minister clarified, saying that the aim is to make sure that almost 60 ordnance factories in India are better managed so that they can traded publicly.
The focus will also be on procurement of spares, which are made in India, the minister said.
The reforms aim to reduce India’s massive defence import bill, Sitharaman said. According to the Stockholm International Peace Research Institute (SIPRI), the US, China and India were the world’s three biggest military spenders in 2019, followed by Russia and Saudi Arabia. The two Asian countries made it to the top three for the first time, SIPRI said in a report last month.
Sitharaman’s announcements were part of the ₹20 trillion stimulus package meant to restart the Indian economy. The country has been under the world's most stringent lockdown since 25 March to arrest the spread of covid-19 infections.
Prime minister Narendra Modi in February had set a target of $5 billion for India's defence exports in the next five years at the inauguration of the 11th Defence Expo in Lucknow. He had invited private players to invest in the country, which would realise the twin objectives of handsome returns on investment and making Asia’s third largest economy self reliant in defence manufacturing.
India has inaugurated two defence industrial corridors, in Tamil Nadu and in Uttar Pradesh, to boost the flagship 'Make in India' programme that in turn would attract investments as well as encourage employment generation.
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