Scribd
Upload
175 views

FDI in Defence

FDI in defence was permitted in India starting in 2001 to boost the domestic defence industry and reduce reliance on imports. Several government approvals are required for foreign investment in defence. The defence budget has increased significantly in recent years but India still imports 70% of its military needs. Allowing higher FDI limits up to 49% aims to attract foreign technology and expertise to develop indigenous production capabilities. However, some concerns remain around maintaining control over strategic sectors and fully transferring proprietary technologies. Joint ventures between Indian and foreign defence companies show promise in developing skills and global supply chains to achieve the goal of self-reliance in defence manufacturing.

Uploaded by

avi2015
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
175 views

FDI in Defence

FDI in defence was permitted in India starting in 2001 to boost the domestic defence industry and reduce reliance on imports. Several government approvals are required for foreign investment in defence. The defence budget has increased significantly in recent years but India still imports 70% of its military needs. Allowing higher FDI limits up to 49% aims to attract foreign technology and expertise to develop indigenous production capabilities. However, some concerns remain around maintaining control over strategic sectors and fully transferring proprietary technologies. Joint ventures between Indian and foreign defence companies show promise in developing skills and global supply chains to achieve the goal of self-reliance in defence manufacturing.

Uploaded by

avi2015
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 13

FDI in Defence

What is FDI?
Foreign Direct Investment is a direct
investment into production or
business in a country by an individual
or company in another country either
by buying a company in the target
country or by expanding the existing
operations

Authority dealing with FDI

Approval from RBI


Permission from FIPB
Permission from SIA
Permission from FIIA
Investment Commission

A foreign company planning to setup


business in India has following options
Investment under automatic rule
Investment through prior government
approval

Authority dealing with FDI


Investment by share acquisition
A foreign investing company is entitled to acquire
the shares of an Indian company without
obtaining any prior permission of the FIPB subject
to prescribed parameters.

General permission of RBI under


FEMA
Indian companies having foreign investment
approval through FIPB route do not require any
further clearance from RBI for receiving inward
remittance.

FDI in small scale unit


A small-scale unit cannot have more than 24 per

FDI in Defence
India permitted FDI in defence only since
2001, when private sector was allowed
entry in defence production.
Earlier the defence production was carried
out only by few PSU used to manufacture
heavy equipment for armed forces.
Due to this India has become worlds
largest importer of arms since 2010.
India spends around 2.5% of GDP on
defence and military expenditure has
increased by 231% between 2001 and
2011.

Defence Budget
2013-2014

2014-2015

Defence Budget(in
crore)

203672.12

224000.00

Growth of Defence
Budget

5.31%

9.98%

Defence Budget Sharing


DRDO; 5% Ordinace Factories; 1%
Navy; 17%
Army; 53%
Air Force; 24%

Why FDI in defence?


To boost the domestic defence
industry manufacturing sector, which
imports 70% of its military
requirements.
A vibrant successful defence industry
which brings economic benefits such
as balanced payment, skilled
manpower, export potential.
FDI in defence is not just getting
funds but also to get access to latest
technologies.

Recent Government Policies

Make in India to promote defence


manufacturing.
FDI limit increased from 26% to 49%.
As per the latest figures tabled in
parliament Govt of India clears 16 defence
license proposal worth 613 crore.
FDI investment inflow into India surged
112% in April to 3.6 billion from 1.7 billion.

Challenges

Primary concern is that allowing greater FDI


will reduce control over security sensitive
sector.
Raising the limit from 26% to 49% makes no
fundamental difference to control majority
Indian partners.

Challenges
Modern defence systems are complex and
not available from single source.
Heavy initial investment.
International arms trade, does not follow
the dynamics of open and free market.
Transfer of technology into Indian Market.
Global defence companies will work only
based on licensing requirement of
technology.
Foreign vendors are not comfortable with
transferring proprietary technology to a
company with 26% of ownership

Joint ventures
Estimated by 2020, EADS alone will account
$1 billion of outsourcing to India.
Lockheed Martin of US & British BAE system
are performing multiple partnership.
Indian companies can rake in $ 10 billon in
next 4-5 years.
Vetra group joint venture with russian truck
maker kamaz.
Three joint venture by Tata companies with
foreign majors.
BAE work with public and private sector
partner and bring in global skills at supply
chain management

Goal

The aim of FDI in defence is to


develop indigenous technology and
reduce the dependence on arms
import.
The key is to master the technology,
not the money which we get from
FDI.

Thank you

You might also like