US asks India to raise cap FDI in defence to 49%

Buoyed by its armament majors securing multi-billion contracts, US has asked India to raise its cap on FDI in defence sector to 49% from existing 26%.

Making a pitch for this, the Obama administration also wants India to undertake more sweeping reforms to attract new investments, saying this will propel New Delhi to a higher growth rate.

"Reforms to date have made Indian companies leaders in areas such as IT, pharmaceuticals, telecommunications, and now increasingly, in manufacturing as well as in clean energy. We
hope the India will seize the opportunity to undertake new
reforms that will both attract new investment and propel
higher growth," Assistant Secretary of State for South and
Central Asia Robert Blake has said.

Blake was more particular on opening up of the defence sector, saying, "we are urging the Indian Government to raise the cap on foreign equity in Indian defence firms from 26% to 49% to provide more opportunities for US companies interested in defence sales in India." 

His comments at the Washington International Business Council meeting come as US defence majors Lockheed Martin, Boeing and other firms have bagged almost all the major Indian armed forces contracts worth more than USD 10 billion. 

These includes sale of Hercules C-130 J transport aircraft and Boeing P-8A maritime reconnaissance aircraft. US companies are in strong contention for sale of next generation fighter aircraft to the Indian airforce.





Noting that the US recently had some important sales to India, Blake said there are significant new sales on the horizon, up to USD 18 billion worth of contracts, for which American companies are competing.

Calling India as a rising global power, soon to be the world's most populous country, with a trillion dollar-plus economy, Blake said it is a model of a tolerant pluralistic society in the region.

"And it is a country increasingly comfortable with working with the United States," Blake said. 

This past July, Secretary of State Hillary Clinton visited India and launched a Strategic Dialogue which called for increased collaboration in a number of areas that fall under five pillars: strategic cooperation; energy and climate change; education and development; economics, trade and agriculture; and science, technology, health and innovation. 

In November, president Barack Obama hosted prime minister Manmohan Singh for the first state visit of his presidency, calling India an "indispensable" nation.   

President Obama has also pledged to visit India in 2010, further underscoring the importance of India to the United States, he said.

The state department official said the strength of India's economy makes it the powerhouse of South and Central Asian regional growth.