Allow 49% FDI in defence sector: Assocham

The government should increase the foreign investment limit in the defence sector to 49 per cent for growth of the domestic industry, Assocham today said.

"The suggested move will allow a significant degree of control by Indian government on FDI inflow in defence and encourage domestic industry to seek meaningful foreign tie-ups," Assocham said.

The hike would also help in creating more jobs in the sector, it said, adding the move would also ensure technology transfer.

The industry department has initiated a discussion for further increasing the foreign direct investment in the defence sector currently capped at 26 per cent.

Proposing 74 per cent FDI in the sensitive sector, the Department of Industrial Policy and Promotion (DIPP) had stated that 100 per cent overseas investment would be "desirable".

India's massive defence budget has the potential to make it a global manufacturing and services hub in defence.

"India must seize this opportunity and put in place a policy regime that would facilitate investments (foreign and local), transfer of technology (ToT) and creation of jobs in India," it said.
     
India's cumulative defence budget has been growing annually at 13.4 per cent since 2006-07 to Rs 1,47,344 crore ($31.9 billion) in 2010-11.
    
Of this, about 40 per cent is capital expenditure and 70 per cent of which (about $8billion) is met through imports.