Page 563 - SSB Interview: The Complete Guide, Second Edition
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including all sectors, was about $321.81 billion during the same period. It is
evident that the contribution from the defence sector is very low. In 2016, the
government introduced 100% equity in the domestic defence sector.
According to this, a company can invest 49% through the ‘automatic route’
and 51% through the ‘government route’. This was introduced to utilise state-
of-the-art technologies with support from other countries. It not only helped
the country to develop its economy but also to exchange technology.
Challenges for FDI in Defence Sector
Sadly, most of the investors are not interested in investing in India
remembering the fact that the budding domestic companies in the defence
sector are vulnerable. Some big companies stated that they need more
management control to build and maintain high-class military technology in
India. Only a few companies invested in this sector, which ultimately
compelled the government to increase the offset threshold to `2,000 crores.
From the period April 2014 to December 2017, India was able to attract only
$0.88 million even after liberalising the FDI policy. By this time, Indian
investments in other countries exceeded `1.25 lakh crores by signing various
deals. It includes import of radars and missiles from Israel, aircraft and
artillery guns from the US, fighter planes and ammunition from France and
rockets and simulators from Russia.
Future of Defence Sector through FDI
India is the largest importer of arms among other countries. It is because most
of the defence equipment sectors are procured by the government and the
exporting of such equipment has many regulations. India wishes to be one
among the top five military equipment providers.To achieve this milestone,
the government plans to further relax the FDI rules by increasing the
automatic route investment to 74% from the existing 49%. This was stated in
a meeting convened by the Department of Defence Production. This will
benefit sectors like:
