Writing and article / defense budget - FDI

Discussion in 'Members Corner' started by Senior_Miguel, Jul 22, 2014.

  1. Senior_Miguel

    Senior_Miguel Regular Member

    Nov 7, 2011
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    Hey guys! I'm writing an article to the defense monthly I work with (@rock127 will know, what I'm talking about) on the new Indian defense budget and the increase of the FDI in defense sector. As long as I can understand what are the reasons of hiking the budget and what the extra money will probably go for, I have some problems with this 49% FDI thing. I don't want to mess things up in my article, so I wanted to ask you, guys, for a little explanation on how did this foreign investment in your defense sector look like before the hike (I've read that 49% is still too low for the biggest companies like LM, Boeing, Airbus and they will not be attracted enough to invest). If this 49% is still too low, why did the GOV decide to rise it anyway? I mean, if Indian journalists, who I read, know that you need more than 50% of FDI to attract foreign investors, the GOV must know that as well. So why didn't they go for more than 50% FDI?

    Thanks for your opinion or any help (links) given!

  3. ladder

    ladder Senior Member Senior Member

    Mar 28, 2013
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    Few quick points ( and my views)

    1. 49% cap is to keep the management of the said JV into the hands of Indian partner.

    2. Before this hike, a case to case basis was followed, Brahmos aerospace is an example.

    3. The JV between Mahindra and BAE Land system for MRAP can also be a case study of a JV before hike.

    4. Pipavav also has some understanding with some companies for combat avionics/ software can also be looked at.

    4. A new company may not find the 49% enticing but think of those companies who have sold or will be selling goods to Indian defense. They are bound by offset rules (30 to 50%) they will find this hike a welcome respite to make India as a hub for their Asia pacific business.
    They were bound to invest a fixed sum for offset, but now with 49% they can consolidate their investment in India.

    Pilatus wanted to set up a unit for assembly for their PC12 turboprop in India against the offset. with 49% stake, they will have larger control ( than before) over the JV.

    5. The FICV project, Design for Naval platforms, Howitzers/ SPH/mounted guns and aircraft projects will gain from this offset hike.

    6. One thing is true, no one will share critical technology for 49% FDI. But that's not the aim. Aim is modern production technology and assembly line which we are currently lagging. We are having a problem from transferring prototype to assembly line production.

    7. 49% is good enough to shift production line to India. ( at least)
    Last edited: Jul 22, 2014
  4. sob

    sob Moderator Moderator

    May 4, 2009
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    New Delhi
    There is even an option on 100% FDI in critical technology areas.

    This is a note circulated by the Commerce Ministry
    Govt moves to hike defence FDI up to 100% - The Times of India

    There is some opposition from the Political parties as well as some section of Indian Industry who fear they will be edged out by Foreign Companies.

    Industry chambers flip-flop on 100% FDI in defence sector - The Times of India

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