Prime Minister Narendra Modi has opened a window for majority foreign ownership in defence companies, pointing to an important policy shift just months after India raised the FDI limit in the sector to 49%.
Modi, for whom domestic manufacturing is a key strategic goal, tied any increase in the FDI limit to another important goal -the acquisition of the latest technology that in the long run will help India become a self-sufficient arms producer in the most crucial areas.“We ha ve raised the permitted level of FDI to 49%. This can go higher, if the project brings state-of-the art technology ,“ the PM said at Asia's largest air show -Aero India -in Bengaluru.
In August, the FDI limit in defence was increased from 26% to lure foreign defence suppliers to set up manufacturing facilities in a country that is the world's largest arms importer.For much of its history , India has had a friendly relationship with Russia, the top supplier of weapons and other defence platforms, but local production and innovation have not lived up to promises. “We have the reputation as the largest importer of defence equipment in the world,“ he said. “That may be music to the ears of some of you here. But this is one area where we would not like to be No. 1,“ the PM said. “It will be no longer enough to buy equipment and simply assemble them here.“
In the past five years, India has imported capital equipment worth more than Rs.1 lakh crore for the armed forces, making the country a lucrative market for foreign defence companies. Modi, who is pursuing a close strategic partnership with the US, is aiming for India to quickly imbibe advanced western technologies while opening up the vast Indian market to their defence firms.