This, even as, according to a Department of Industrial Policy and Promotion (DIPP) data in last December , there was a dismal FDI equity flow in defence at just $0.08 million between October 2014 and September 2015.
In a bold move, the government on Monday eased foreign direct investment (FDI) norms for nine sectors, including in defence.
"Present FDI regime permits 49% FDI participation in the equity of a company under automatic route. FDI above 49% is permitted through government approval on case-to-case basis, wherever it is likely to result in access to modern and 'state-of-the-art' technology in the country," the government said in a statement on investment in defence sector.
This, even as, according to a Department of Industrial Policy and Promotion (DIPP) data in last December , there was a dismal FDI equity flow in defence at just $0.08 million between October 2014 and September 2015.
Foreign investment beyond 49% has now been permitted through government approval route, in cases resulting in access to modern technology in the country or for other reasons to be recorded. The condition of access to 'state-of--the-art' technology in the country has been done away with.
FDI limit for defence sector has also been made applicable to manufacturing of Small Arms and Ammunitions covered under Arms Act 1959.
"I think this is a very positive news. 49% FDI limit was becoming a deal breaker for foreign companies to set up shop in India given their concerns on IP protection, in a market which is very uncertain and traditionally slow. This move is a game-changer to attract various foreign defence companies which play various value chain roles to invest in India, not only to address Indian demand and local content requirement but also for their global supply chains leveraging low cost advantage,"Anurag Garg, Director PwC's strategy and aerospace & defence lead told dna.
"This may not mean that the role of Indian companies as a partner will diminish, as one may expect proposals to range from 51% to 100% given the expected role of an Indian partner,"he said adding that it would be the responsibility of the government to move fast in evaluating and approving FDI proposals to build some momentum in the sector henceforth.
A Didar Singh, secretary general, FICCI said, "Simplification in the policy framework governing investments in a whole host of sectors including strategic sectors like defence and aviation is a huge positive for the economy.
The Modi administration through these moves has once again highlighted that reforms is a continuous process in order to capitalise the potential India offers."
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