Just Rs 1.1-cr defence FDI in 3 yrs

Ajay Banerjee

Tribune News Service

New Delhi, August 1 

In what reflects ‘lack of interest’ of foreign companies in the Indian defence manufacturing sector, there has been a mere Rs 1.13 crore foreign direct investment (FDI) in the past three years. 

The Ministry of Defence (MoD) had touted FDI in defence as major shift in policy and okayed upto 49 per cent stake for foreign companies to come and partner Indian companies.

The MoD has given figures in Parliament that are startling. In the present fiscal, no FDI had come in till May. In the 2014-15 fiscal, the total FDI was US $78,000, with major chunk from France. In the 2016-17 fiscal, the investment was a mere US $1,000. The ‘biggest’ FDI inflow was in 2015-16—US $95,000. 

This is far less than the overall FDI inflow in the country during the 2016-17 fiscal when US $60.08 billion (about Rs 3,86,885 crore) investment came. The cumulative FDI in the country during April-May this year was US $10.02 billion, or about Rs 65,000 crore. 

The MoD, in its reply to a question in Parliament, said “since defence projects involve long gestation period and investment inflow takes time even after the projects are approved and contracts awarded, there is always a time lag before the impact of FDI is visible”. 

In 2016, a revised FDI policy on defence was announced. This okayed FDI up to 49 per cent under the 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. 

The government has also put in place a Security Manual for Licensed Defence Industries. The security manual prescribes guidelines on physical, information, documentation, cyber and personnel security aspects. 

The FDI in defence policy has been reviewed with an aim to promote investment and technology transfer in defence manufacturing sector. This sector needs significant capital investment and infusion of technology for which foreign investment can play a critical role. 

The FDI in the sector could be the most trusted route to technology transfer, which would help in increasing the defence production base and providing the much-needed impetus to self reliance and indigenisation in the defence sector, the MoD has accepted in Parliament.