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Can India Grow to Invest In defence Capability?

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sonali sharma
Can India Grow to Invest In defence Capability?

In September 2020, the GoI announced increased FDI limits in Indian defense firms, although with some limitations. Earlier, the foreign ownership in Indian defense companies could not exceed 49.0% without aforementioned governmental approval. However, the new rules allow for up to 74.0% foreign investment, not considering government approval; though, the relaxation is constrained to companies looking for new industrial licenses. Studies have indicated that several multinational corporations (MNCs) headquartered in the US and Europe are uncertain to enter in partnerships with Indian defense firms due to the fears surrounding prior governmental approval. MNCs generally are hesitant to share their confidential defense technology and information without first having a majority share in the joint venture.

Although, the new rules appear satisfactory to foreign companies, other import limits currently maintained by the GoI may weaken efforts to boost foreign participation in the Indian defense industry. For any new FDI, a target company be obliged to submit a testimony to the Ministry of Defense in a span of 30 days of the closing of the investment deal. The Department for Promotion of Industry and Internal Trade released Press Note 4 to validate the FDI reforms specifically. The new regulations will become mandatory once formal amendments are made to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

In August 2020, the GoI announced an import ban on more than 100 weapons, platforms and other defense items. The import ban is targeted at fostering India’s defense industrial base. The ban is particularly planned to be progressively executed between December 2020 and 2024. Nonetheless, the defense investors and contractors are monitoring these developments, as it represents an opportunity to engage India’s defense industry.

 

Read More:- https://www.pukkapartners.com/insight/indias-investment-in-improving-defense-capability-a-complex-opportunity

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sonali sharma
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