IndexIntroductionFDINeed for FDIChallenges regarding FDI in DefenceInternational Joint-VenturesProblems in Permitting Higher FDIImportance of FDI in Defence
Introduction• FDI is a direct investment into production orbusiness in a country by a company in anothercountry, either by buying a company in thetarget country or by expanding operations of anexisting business in that country.• Defence sector is will be highly affected by FDIfrom several companies like BAE systems ,DCNS , EADS etc.
FDI• India currently has only 26% of FDI indefence industry but it will increase as saidby MoCI• India currently procures approx 70% of itsequipments from abroad, but thegovernment aims to reverse it.• It enhances job opportunities , properpayments , more export and bettereconomic stature.
Need For FDI• Defence sector is sector where hugecapital is required for production aswell as R&D.• Technology is something which has anevitable and continuous changes.• FDI will bring latest technology
Challenges Regarding FDI inDefence• Private sector still hasn’t got that catch hold over defence sector• Only 26% investment ceiling is not that profitable for investors• Resistive nature of MoD• Higher proposed raise in FDI by MoCI
International Joint Ventures• L&T and EADS JV for building defence systems forelectronic warfare• Rolta India renews partnership with Intergraph Corp indefence security• Three joint ventures by different Tata companies withforeign majors• European naval systems major DCNS announces Indianventure• Vectra Group forms JV with Russian truck maker Kamaz
Problems in Permitting Higher FDI• The primary concern is that allowing greaterFDI will reduce India’s ‘control’ over a securitysensitive sector.• Raising the ceiling from 26% to 49%, makes nofundamental difference to the controlmajority Indian partner holding 51% .
• Less development of indigenous DefenceIndustries• Indirect economic control of companies overFDI in Indian Industries
Importance of FDI inDefence• Higher stake allows the foreigner greaterincentive to bring in latest technology to India• Significant development in quality andquantity of defence equipments• Proper growth in Economic sector• Meets the need of armed forces• Defence industry’s skill will be enhanced
My Views• 49% FDI should be permitted as foreignindustries also may attracted for investment inIndia.• It will empower the military power of India onglobal level• International ventures helps us in makingfriendly relations• Less expenditure on Military exports