New avenues in the Indian Defence Industry FDI

Indian Defence scenario is now on the verge of a major change.

With Narendra Modi taking up charge as the Prime Minister with promises of quick economy revival, defence in India has already begun witnessing changes. Major European countries are all interested to make the best out of this opportunity and have offered to provide full support for infrastructural projects, sophisticated technology and advanced equipment.

This arrangement can be a great benefit to both India as well as Europe: India is in the need of $1 trillion by 2017 to be able to upgrade its infrastructure and firms in Europe are keen to venture into the Indian market. French foreign minister as well as that of the United Kingdom, have shown interest. Germany also has extended its offer to organize a meeting between its chancellor Angela Merkel and the Indian Prime Minister. 

European firms are interested in the domestic defence market. India needs a lot of investment to be pumped into its economy, especially FDI, so that it sees growth in its infrastructure, government officials believe. Also the Indian armed forces is in need of sophisticated arms and ammunition and maybe it is time they had them at their disposal, officials added.

France, just like Russia, has been the ‘good samaritan’ for India: partnering in the areas of defence, space as well as nuclear energy. France, quite unlike other develop countries, had made no impositions after the Pokhran II nuclear tests that were carried out in India. Instead, it chose to aid India in its peaceful nuclear programme.

India, exhibited its acknowledgement by choosing the Raffle fighters over other fighter jets, a few years back, which had been provided by France on a global political platform. France is expecting a quick conclusion over the 126 Raffale fighter jets deal. The Indian Prime Minister Mr Modi, asked for French cooperation in tourism and cost effective defence manufacturing, when he met Foreign Minister Laurent Fabius.

France can aid in building heritage cities which are smart in India, according to officials. The Ahmedabad Heritage Project is an apt example of such initiatives. India has been offered a credit of up to one billion euros to be able to fund its infrastructure and urban developmental projects.

Britain is now more than eager to push for its own Eurofighter, noticing delay in the Raffle deal. The finance minister of Britain has also offered a credit of one billion pounds to India.

The word in the air is that FDI in Indian defence can be raised to 100% from 26% aiming to give a boost to the manufacturing projects that have been planned.

Some sources have mentioned that bringing in an  FDI in the defence  sector "will hugely help in reducing import bill for defence equipment, will help in boosting manufacturing and creating jobs".

India happens to be one of the largest defence importers in the world with few exports in the defence industry. It ranks among the top ten countries in the world with respect to military expenditure. Presently, India imports over $8 billion worth in terms of defence ammunition and equipment. India’s defence budget is growing at an average rate of 13.4% each year since 2006-2007.

"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," DIPP had mentioned earlier.

Will this new policy boost India as well as the global economic growth?

Only time can tell.