FDI in Defence Sector

bengalraider

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What India needs is not FDI, we have too much money already invested in the private defence sector by our domestic players. what we need is the will to buy local and the push to buy local.we cannot buy an entire MIC from abroad by allowing 100% FDI , we need to grow our own MIC. The roots are already ready what is required is for the GOI to stand up and order massive quantities of local Equipment , FDI at the most should be restricted to JVs .
 

prohumanity

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Modi and his type can not sell nation's security to the west...as far as I know from their past behavior and ideology. We are not clearly understanding the meaning of this FDI issue. Who will be willing to transfer high tech weapons technology? May be Russia.......I doubt the West is willing to transfer technology...they want to sell weapons to India and make huge profits.....once they transfer technology.. they lose the grip as India can mass produce those weapons. I doubt West will be willing for TOT. Nationalists like Modi can not betray India by doing something which goes against the national security of India.....otherwise it will be very soon they will be kicked out of power by people. Indians can't be fooled easily.
 

mattster

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Modi and his type can not sell nation's security to the west...as far as I know from their past behavior and ideology. We are not clearly understanding the meaning of this FDI issue. Who will be willing to transfer high tech weapons technology? May be Russia.......I doubt the West is willing to transfer technology...they want to sell weapons to India and make huge profits.....once they transfer technology.. they lose the grip as India can mass produce those weapons. I doubt West will be willing for TOT. Nationalists like Modi can not betray India by doing something which goes against the national security of India.....otherwise it will be very soon they will be kicked out of power by people. Indians can't be fooled easily.
it does not matter if they don't fully transfer tech......they are not doing it today. As long as the manufacture assemble, and do some design work locally it will benefit India tremendously by creating jobs and getting higher quality equipment to the Indian Armed forces
 

AVERAGE INDIAN

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Industry pushes for FDI in defence

"FDI is directly linked with core national priorities such as raising manufacturing growth to 25% of GDP, significant job creation and bringing high end technology into the country. The associated benefits are the spin offs for the civilian market, a CII statement said.

CII is very keen to see very high-tech and highly complex System Integration work being done in India and Indian industry is ready to take this challenge and opportunities. Opening up various sectors have helped Indian industry grow and become globally competitive.

India has witnessed a resurgence of its manufacturing sector over the last two decades on the backdrop of robust domestic demand and increasing private participation. Amongst the emerging economies, India's manufacturing sector has established its name for better quality, design and innovation. The country has already made its mark in the automobile and automotive components sectors with a number of auto giants around the world sourcing from India, the CII statement said.

Further, the domestic heavy and light engineering sectors have come a long way with high end innovations and capabilities. The Indian automotive sector has also started leveraging Indian industry's strengths in IT, high tech engineering and research and design capabilities, it added.

Currently the defence sector contributes between 2.5 to 3 percent of the global GDP. However, India's share is disappointingly very low. India can leverage its purchasing power, IT infrastructure and manufacturing potential to be one of the key global manufacturing hub for defence systems and equipment, the statement argued.

A meager USD 4.8 million FDI under the 26 per cent cap came to India ever since the defence sector was opened up for the private enterprises' participation. Raising the FDI in defence sector will create more opportunities within India. CII would also fully endorse the Government's initiatives of linking FDI with the exports from India. No business can be sustained for the long term just on the basis of domestic orders. There is an immediate need to revisit export policy.

CII recommends that policies should be industry-friendly and less ambiguous, making it easy to understand and interpret. Other issues like Industrial Licensing and Foreign Institutional Investment should also be addressed adequately.

CII has already projected in one of its reports, "Creating a Vibrant Domestic Defence Manufacturing Sector" that defence and aerospace sector has the potential of creating one million new jobs in the country. FDI will only expedite this process.

CII is hopeful that the present government is going to roll out a forward looking FDI policy in the defence sector at the earliest. SMEs are going to the biggest beneficiaries of the liberal FDI policy. Huge supply chains complying with world class standards will come up around the manufacturing facilities. This would also help Indian SMEs to enter into the global supply chain of the OEMs, the statement said.

The time has come for India to project itself as an ideal destination and attract the foreign manufacturers to set up defence manufacturing facilities in India for global defence markets. India's own defence procurement will act as an incentive for foreign OEMs to set up facilities in the country. This should, in turn, catalyze both the development and the influx of high end technologies and efficiencies into the country which can be used to pioneer innovations across multiple sectors, the statement said.

"In order to attract investments in the defence sector, higher FDI cap, wherein the foreign investor having majority equity, will act as a catalyst. Higher FDI will definitely help in creating a vibrant domestic defence industrial base in the country. We congratulate the Government of India for initiating forward looking policy measures" said CII President Ajay Shriram.

Industry pushes for FDI in defence - The Times of India
 

prohumanity

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Folks...think seriously...any nation who is willing to empower India..will only be interested in technology transfer. The adversary nations or who desire to dominate and supress India will not do technology transfer. Lets wait and see which nations step up to the plate. Only strategic friends and well wishers will
step forward to technology transfer. This will clarify who India's real well wishers are?
 

Neil

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How to transform the country from world's largest defence equipment importer to major exporter


The government's recent decision to deregulate manufacture of a number of items used by the defence forces will result in new players and SMEs entering the sector. Easy entry will result in an increase in the number of manufactures, with the benefit of competition that will improve both quality and cost-effectiveness. This will also encourage them to seek export markets for their products.

Socio-economic growth and a credible defence capability achieved through self-reliance are fundamental for a nation to secure a globally respectable position. In a world where a few developed countries enforce control regimes on defence equipment and technologies, it is imperative for a country like India — a growing economy with formidable capability, to maximise indigenisation and self-reliance in defence equipment. Further, with defence exports becoming an increa-singly effective diplomatic tool in assuring regional peace and secu-rity, it is crucial for India to be-come a global defence exporter.

A small country like Israel, which gained independence at almost the same time as India and with a population less than 1% of India's, today accounts for 10% of total global defence exports. China which until 2006 was the largest importer of defence goods, is today the fifth largest defence equipment exporter. Paradoxically, India, with its huge pool of technically qualified, globally competitive manpower, in dire need for employment for its population, has emerged as the largest importer.

India has all the attributes of becoming a major exporter of defence equipment. Considerable investments have been made over the years in creating indigenous defence manufacturing infrastructure in the form of DRDO labs, DPSUs, ordnance factories, some highly reputed educational institutions and a few industries in the private sector. The large young population can provide skilled, cost-effective manpower for the defence industry and the huge SME base can contribute effectively, both directly as well as in collaboration with large system integrators.

Recent amendments to the defence procurement policy have provided a new thrust for indigenisation. Introduction of major programmes in the 'make' category, allowing participation of Indian public and private industry, is a big step in the right direction towards developing cutting-edge technology. Defence offsets and the proposed liberalisation of FDI in the defence sector must be leveraged judiciously to enhance indigenous capabilities.

The defence industry is capital intensive and characterised by a cyclical nature in order placement for domestic needs; it typically needs a large customer base to be competitive and to sustain business. This can be achieved only when both domestic and export markets are opened for industry.

A well-defined policy to promote defence exports, complying with international agreements such as the Wassenaar Arrangement and Missile Technology Control Regime, will provide the necessary international legitimacy.

It is time now to shed the public vs private sector mindset and consider the entire defence industrial base in India as the 'national defence sector'. It is important that domestic programmes are opened up for competition wherever possible. SMEs capable of developing niche technologies should be encouraged, while the stalled pro-posal to identify platform builders and system integrators — Raksha Udyog Ratnas, must be immediately implemented.

To safeguard the interests of the defence industry in the private sector, and to derive the maximum benefit from synergies, it is essential to eliminate the conflict of interest inherent in the current structure of ministry of defence. The department of defence production must be made independently responsible for equitably addressing the concerns and synergising strengths of the country's defence industrial base, including the private as well as public sectors. It should also be held accountable for achieving preset time-bound targets for indigenisation and exports.

Globally, respective governments strongly promote sales of their defence exporting firms without discriminating between private and public sectors. UK Trade and Invest and SIBAT-Israel, are good examples. It is common for heads of state of developed nations to actively promote sale of their defence products. In 2013, for the first time, top officials of DRDO led an Indian defence industry delegation to ADEX 2013 in Seoul. Such initiatives should be encouraged and strongly supported by the political leadership.

Increased emphasis on R&D and innovation is vital for achieving self-reliance in defence equipment. In order to realise the untapped potential in indigenous technologies, DRDO must be authorised to form partnerships with organisations of their choice for cutting-edge technology deve-lopment, while simultaneously allowing use of their facilities on commercial terms by companies in the defence field.

Defence exports are often used as a diplomatic tool either through supplies as goodwill gestures or through soft loans and lines of credit. This policy has been used extensively and effectively by China to expand its presence in the Indian Ocean Region, Africa and Latin America. India should evolve its own "Integrated Defence Production and Export Policy" learning from the success stories of countries like China, Israel, South Africa and South Korea.

India's approach to defence exports will be guided by changes in the geopolitical situation, as we build stronger diplomatic ties, particularly with nations in the Indian Ocean Region. If the government and national defence industry embrace the challenge, India can not only effectively meet domestic needs but also emerge as a major exporter of defence products. We need a major thrust — a national mission on defence equipment exports.

The writer is Group Executive Chairman, Larsen & Toubro.



How to transform the country from world's largest defence equipment importer to major exporter - The Times of India
 

cobra commando

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Defence Ministry Suggests 49 Per Cent FDI in Defence Sector

NEW DELHI: The Defence Ministry has suggested raising the cap in FDI in defence sector to 49 per cent from 26 per cent now to help in developing partnerships between Indian and foreign military hardware manufacturing firms. The Ministry is in favour of allowing 49 per cent FDI in defence sector through the approval route, Defence Ministry officials said. The suggestion has come soon after the Commerce and Industry Ministry circulated a Cabinet note for inter- ministerial consultation to allow raising of FDI limit to 100 per cent through the Foreign Investment Promotion Board (FIPB) route. The stand taken by the Defence Ministry is in line with the promises made by BJP during election campaign and Prime Minister Narendra Modi's assertion to expand the domestic defence industrial manufacturing base in the country. India opened up the defence equipment industry to private sector in May 2001, but restricted foreign participation to 26 per cent in this capital-intensive and sensitive sector. India is one of the largest defence importers in the world with a minuscule component of exports and ranks among the top ten countries in terms of military expenditure. "The bulk of the domestic production is met either through the Ordnance Factories or the Defence PSUs. Even when defence products are manufactured domestically, there is a large component of imported sub- systems," the Department of Industrial Policy and Promotion (DIPP) had said.
Defence Ministry Suggests 49 Per Cent FDI in Defence Sector - The New Indian Express
 

cobra commando

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Security Concerns over
Defence FDI Taken Care of:
Govt


NEW DELHI: The Centre has said its latest policy on allowing 49 per cent foreign direct investment (FDI) in the defence sector has taken care of all security concerns, apart from it finalising and putting in public domain a security manual for private players in the sector. Defence Minister Arun Jaitley told the Rajya Sabha in a written reply that since defence companies having the FDI would have Indian management and control, the security concerns are duly taken care of. He told the House that the foreign investment in Indian companies can be made only after approval by the Foreign Investment Promotion Board (FIPB). "In the Union Budget 2014-15, it has been announced that the composite cap of foreign exchange is being revised to 49 per cent with full Indian management and control through FIPB route for defence sector," Jaitley said. "Since defence companies having foreign investment will have Indian management and control and foreign investment in such companies will be approved through the FIPB route, security concerns are duly taken care of," he said. "Besides, the government has finalised and put in public domain a security manual for private sector defence manufacturing units," he said. Since 2001 when the defence sector was opened up for the FDI, the cap for involvement of firms from abroad in Indian entities was 26 per cent. Only on a case-to- case basis and after considering the technology that could accrue to India, the government allowed more than 26 per cent FDI.
Security Concerns over Defence FDI Taken Care of: Govt - The New Indian Express
 

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