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Just a crore of FDI in defence

March 19, 2018 By Rohit Srivastava Illustration(s): By Anoop Kamath / SP Guide Pubns

At a time when India is making efforts to reduce its defence import bill and develop defence manufacturing through 'Make in India' initiative, the Foreign Direct Investment (FDI) figures shared by the government shows little interest of the world in Indian defence sector.

According to the Minister of State for Defence Subhash Bhamre, "Foreign Direct Investment (FDI) of amount US$ 0.18 million has been received in defence industry sector from April 2014 to December 2017." He said this in a written reply in Lok Sabha on March 7. Going by the current conversion rate, this amount comes to 1.17 crore.

In 2016, India revised its FDI policy on various sectors including defence. In the new policy, FDI up to 49 per cent "is under automatic route and beyond 49 per cent is through government route wherever it is likely to result in access to modern technology or for other reasons to be recorded."

According to the Minister of State for Defence Subhash Bhamre, "Foreign Direct Investment (FDI) of amount US$ 0.18 million has been received in defence industry sector from April 2014 to December 2017."

Last year, Government informed Parliament, "In the year 2014-15, FDI of US$ 0.77 lakh and US$ 0.01 lakh has been received from France and Israel respectively. In the year 2015-16, FDI of US$ 0.95 lakh has been received from France. In the year 2016-17, FDI of US$ 0.01 lakh has been received from Israel."

These figures clearly show that the foreign investors are not interested in making direct investment in Indian companies. Instead of investment, foreign players tends to form joint ventures with Indian private and public sector for participation in defence contracts where if selected Indian companies would establish factories and foreign partner would support through technology transfer for manufacturing of goods in India.

In last few years, global majors have started fully owned Indian subsidiary, which does not require much FDI.