Commerce Minister Anand Sharma proposes 74% FDI in defence

In a letter to Prime Minister Manmohan Singh, the Commerce and Industry Minister Anand Sharma has suggested increase in the foreign direct investment from 26 to 74% for the country’s defence sector.

He said the existing limit of 26% FDI in defence is not enough.

“The fact that in the last decade we have received only $4.12 million of FDI inflow in defence manufacturing is a clear testimony of this fact,” Anand Sharma said.

“Understandably, in the absence of their being able to source high-end technologies, it is unrealistic to expect them to make state-of-the-art equipment. Encouraging foreign defence manufacturers to establish manufacturing bases in India will provide a platform for transfer of high-end technology and will also catalyse the growth of domestic manufacturing,” he further said.
“Globally, the defence sector has been the harbinger of new technologies and has contributed significantly to job creation. The U.S. and the EU allow 100 per cent FDI in defence manufacturing with security issues being addressed through verification and clearance procedures,” he further added.

“While increasing the current cap, we could incorporate conditions for minimum value addition to be decided by the FIPB and for those sectors where adequate capacities exist in defence PSUs, the FIPB could well take a view to disallow foreign investment. In case there is reluctance to enhance the cap to 74 per cent, a calibrated approach could be adopted and in the first instance, FDI up to 49 per cent could be allowed,” Anand Sharma proposed.

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