Mar. 23, 2012 - 10:50AM |
By Vivek
Raghuvanshi
NEW DELHI — Indian industry has
called for raising the limit on Foreign Direct Investment (FDI) in the defense
sector from the current 26 percent to 100 percent.
The industry’s lobbying agency, the Associated Chambers of Commerce and
Industry, said March 23 that increasing the limit on FDI will spur foreign
defense companies to provide both capital and technology to India.
The 26 percent cap on FDI has
kept away both capital and technology, Secretary General D.S. Rawat said. “We
must reconsider the cap. There is no reason why we should have one at all and
not allow 100 percent FDI,” Rawat said.
India, which imports nearly 70
percent of its weapons and equipment, spends about $8 billion a month, making
it one of the world’s biggest weapon importers.
The Indian government has been trying to decrease imports by earmarking
some purchases through a category called “Make India,” and giving special
treatment to state-owned defense companies while encouraging research through
the Defence Research and Development Organization. The defense sector was
opened to private players, including foreigners, in 2001, but no major defense
company has established an equity-sharing arrangement to produce weapons in the
country.
Analysts
have cited the 26 percent limit as the main disincentive for foreigners.
“India’s
defense production base needs advanced technology, which can be filled only
through import of hi-tech technology. The increase in FDI will be an incentive
for overseas defense companies to transfer technology here and make India their
production base,” said Nitin Mehta, a New Delhi-based defense analyst.Another scheme to boost domestic production is through offsets, which are estimated at about $10 billion in the next two to three years. But Rawat said the policy needs to be simplified.
“We need to introduce greater transparency as well as simplify the offset approval process,” he said
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