US defence and aerospace companies met Indian industry leaders to narrow differences on what should be the foreign direct investment caps for insurance and defence manufacturing sectors, just weeks ahead of the presentation of Budget FY15.
While the US India Business Council (USIBC) team team met CII on Wednesday and Ficci on Thursday for closed door meetings, its chairman Ajay Banga met Prime Minister Narendra Modi on Thursday.
The details of the meeting with Modi are not known. A source present at the USIBC meeting with Ficci said the key issues discussed were those related to insurance and defence. The American companies want the insurance cap on FDI to be raised to 49 per cent from the current 26 per cent while in the defence sector they have lobbied for a 100 per cent foreign investment where there is “special technology” involved.
However, he added, the visitors were willing to do business “even if the Indian government allowed foreign investors a controlling stake in the joint venture by posting the defence limit at 51 per cent”.
The meetings are significant because segments of Indian domestic industry have said the government should only allow a 49 per cent stake for foreign investors in defence production.
CII is understood to have decided to recommend a 49 per cent cap for defence to the government. The industry body has welcomed the further opening up of the sector but a source said differences have emerged over the percentage of foreign investment which should be allowed in.
The department of industrial policy and promotion has already circulated a Cabinet note proposing three alternatives of 49, 74 and 100 per cent foreign direct investment caps for the sector.
The USIBC team includes the chiefs of Mastercard, Cognizant, FedEx, Bank of America, Standard Chartered, Oracle, IBM, Boeing and Dow among others have also stressed upon enhanced engagement between the two economies in the fields of science and technology, tourism, skill development and education, a chief executive present during the meeting told The Indian Express.