India Inc hopes FDI cap move happens

Ministry of Defence likely to place orders worth nearly $247 bn over next 5 years

India Inc has welcomed the government move to raise foreign direct investment (FDI) limits in key sectors such as defence and telecom but say this has no meaning if it remains a formal exercise.

Chief executives noted the opportunities are immense. For instance, the ministry of defence is likely to place orders worth $247 billion over the next five years.

With some major Indian companies such as Larsen & Toubro, Pipapav Defence, the Mahindras, Tatas and Reliance Industries planning huge investments in this sector, allowing up to 49 per cent FDI would help them raise funds, get new technology and compete with foreign companies to bag these orders. This comes at a time when Indian public sector companies are unable to meet demand and most of the orders are going out of the country, to multinational corporations.

“This is a very good move, which will help Indian companies to get foreign investors and good technology partners,” said Nikhil Gandhi, chairman of Pipavav Defence, which has SAAB AG of Sweden as a minority equity partner. “This move will energise the Indian private sector hugely, due to the buy and make policy of the ministry of defence.”

Raising the FDI limit in the telecom sector to 100 per cent will enable foreign companies to invest in the sector without an Indian partner. “What is important is that foreign investments should have a hassle- free route to India and not be kept waiting. The hike in FDI limit to 49 per cent in the insurance sector has still not been implemented,” said a CEO, asking not to be named.