CII welcomes and fully endorses the Government of India’s move to raise the bar on Foreign Direct Investment (FDI) in the defence sector as reflected in President of India’s address to the Parliament said Ajay Shriram, President, CII in a Statement. FDI is directly linked with core national priorities such as raising manufacturing growth to 25% of GDP, significant job creation and bringing high end technology into the country. The associated benefits are the spin offs for the civilian market. CII is very keen to see very high-tech and highly complex System Integration work being done in India and Indian industry is ready to take this challenge and opportunities. Opening up various sectors have helped Indian industry grow and become globally competitive.
India has witnessed a resurgence of its manufacturing sector over the last two decades on the backdrop of robust domestic demand and increasing private participation. Amongst the emerging economies, India’s manufacturing sector has established its name for better quality, design and innovation. The country has already made its mark in the automobile and automotive components sectors with a number of auto giants around the world sourcing from India. Further, the domestic heavy and light engineering sectors have come a long way with high end innovations and capabilities. The Indian Automotive sector has also started leveraging Indian industry’s strengths in IT, high tech engineering and research and design capabilities.
Currently the defence sector contributes between 2.5 to 3 percent of the global GDP. However, India’s share is disappointingly very low. India can leverage its purchasing power, IT infrastructure and manufacturing potential to be one of the key global manufacturing hub for defence systems and equipment.
A meager USD 4.8 million FDI under the 26 per cent cap came to India ever since the defence sector was opened up for the private enterprises’ participation. Raising the FDI in defence sector will create more opportunities within India. CII would also fully endorse the Government’s initiatives of linking FDI with the exports from India. No business can be sustained for the long term just on the basis of domestic orders. There is an immediate need to revisit export policy.
CII recommends that policies should be industry-friendly and less ambiguous, making it easy to understand and interpret. Other issues like Industrial Licensing and Foreign Institutional Investment should also be addressed adequately.
CII has already projected in one of its reports, “Creating a Vibrant Domestic Defence Manufacturing Sector” that defence and aerospace sector has the potential of creating one million new jobs in the country. FDI will only expedite this process.
CII is hopeful that the present Government is going to roll out a forward looking FDI policy in the defence sector at the earliest. SMEs are going to the biggest beneficiaries of the liberal FDI policy. Huge supply chains complying with world class standards will come up around the manufacturing facilities. This would also help Indian SMEs to enter into the global supply chain of the OEMs.
The time has come for India to project itself as an ideal destination and attract the foreign manufacturers to set up defence manufacturing facilities in India for global defence markets. India’s own defence procurement will act as an incentive for foreign OEMs to set up facilities in the country. This should, in turn, catalyze both the development and the influx of high end technologies and efficiencies into the country which can be used to pioneer innovations across multiple sectors.
“In order to attract investments in the defence sector, higher FDI cap, wherein the foreign investor having majority equity, will act as a catalyst. Higher FDI will definitely help in creating a vibrant domestic defence industrial base in the country. We congratulate the Government of India for initiating forward looking policy measures” added Mr Shriram.
New Delhi