The government’s decision to allow defence FDI up to 100% 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 in India,” 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 100% FDI route.
Recently, while talking to Indian media in New Delhi, Jan Widerstrom, Saab India’s chairman, made it clear that the Swedish defence major is looking at more than 49% FDI in defence in the joint venture that will make Gripen in India.
Under the rules, a company can seek even 100% FDI if it brings in high-technology under the ‘Make in India’ initiative. The government has been working on defining the “state-of-the-art” technology and facilitate the 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%.
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. Interestingly, on Sunday, defence minister Manohar Parrikar in a tweet had termed this venture the largest defence FDI JV.
According to Puneet Kaura, MD and CEO, Samtel Avionics, “100% FDI in defence is the second good initiative in this quarter for the defence industry from government after announcement of Defence Procurement Policy. This shows the government’s commitment towards defence manufacturing within the country and creating more jobs for youth of the country”.
Welcoming the government’s decision, Dhiraj Mathur, partner — aerospace and defence, PwC India, “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. That obstacle has now been removed and coupled with the major simplification in the DPP, OEMs should respond positively and proactively to these path breaking reforms.”