The Union government’s decision to notify list of weapons and platforms which shall not be allowed to be imported and enhance the Foreign Direct Investment (FDI) limit in defence manufacturing under automatic route from 49% to 74% to boost indigenous defence production has been welcomed by the Confederation of Indian Industries (CII).
“Increase of FDI in the sector from 49% to 74% will catalyse overseas investments, while the identification of specific products that can be produced indigenously can encourage domestic production. We believe that the policies announced today would incentivise India's global engagement with more fund inflows and higher competitiveness of domestic industry,” it said.
Jiger Saiya, Partner and Leader, Tax & Regulatory Services, BDO India, said, “Aatmanirbhar Bharat is not an isolated Bharat. FDI reforms in defence manufacturing, coupled with import restrictions, were definitely needed. Mega disinvestment and opening sectors to PPP investments will not only help funding of the stimulus package but will also bring in advanced technology and global best practices to these industries.”
Vishwakumara Kayargadde, Co-Founder and COO , Saankhya Labs said, “We are pleased with the measures announced by the Finance Minister today to provide a boost to domestic manufacturing in the defence sector, which are in line with the country's Make in India mission. By raising the FDI limit in defence manufacturing under the automatic route from 49% to 74% and by putting a ban on the import of certain defence equipment, today’s announcements have provided a boost to Indian companies in providing indigenously designed and manufactured solutions.”
According to CARE Ratings, FDI in defence increased but imports to be curbed. Companies manufacturing these products would benefit both ways – get FDI and also have demand. Self-reliance would increase, it said.
“Another important step in the form of allocating a separate budget for defence procurement will see new investments in the sector and help high-tech companies such as Saankhya Labs an opportunity to develop next-gen indigenously designed, developed and manufactured [IDDM] communications solutions for the armed forces. Additionally, with the government taking measures towards the indigenisation of imported spares, we will see new technology-driven start-ups emerge in the defence sector and this will provide a major fillip to the sector,” Mr. Kayargadde added.