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!
Michal
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)