FDI in Defence: Foreign OEMs likely to make a beeline

However, the real test would be in the case of US companies. Japanese and South Korea firms would also like to come in through the 100 per cent FDI route.

By: ENS Economic Bureau | New Delhi | Published: June 21, 2016 1:11:00 am

The government’s decision to allow defence FDI up to 100 per cent without the access to technology clause is expected to result in a surge of interest on part of the foreign vendors, analysts said. Global players from Israel, Russia and European companies are expected to make a beeline to India for setting up their plants in India. “Russian Kalashnikov is known to be looking for Indian partners in our country for manufacturing,” said Surua Gangadharan, defence analyst.

However, the real test would be in the case of US companies. Japanese and South Korea firms would also like to come in through the 100 per cent FDI route.

Recently, Jan Widerstrom, Saab India’s chairman, made it clear that the Swedish defence major is looking at more than 49 per cent FDI in defence in the joint venture that will make Gripen in India.

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Under the rules, a company can seek even 100 per cent FDI if it brings in high-technology under the ‘Make in India’ initiative. The government has been working on defining ‘state-of-the-art’ technology and facilitate flow of FDI in the defence sector, as several global defence companies have expressed their intention of setting up their manufacturing base in India if the FDI cap is raised to 100 per cent.

The announcement comes at a time when TATA Boeing Aerospace Limited (TBAL) joint venture has been established to co-produce Boeing AH-64 Apache helicopter fuselages and other aerostructures as well as to pursue integrated systems in aerospace.

According to Puneet Kaura, MD and CEO, Samtel Avionics, “100 per cent FDI in defence is the second good initiative in this quarter for the defence industry from government after announcement of Defence Procurement Policy.” Dhiraj Mathur, partner – aerospace and defence, PwC India, said, “Defence is extremely technology driven and OEMs invest huge sums of money generating technology and IP. The fact that there was no control permitted earlier was a major issue that was quoted for not investing in India.” FE

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