Defence FDI cap raised to 49 pc; Ministry gets Rs 2.29 lakh cr

With an aim of boosting its military industry, India today decided to allow up to 49 per cent FDI in defence sector and allocated Rs 2.29 lakh crore for defence, an increase of 12.5 per cent over the last year.
Announcing decision on the long-pending proposal to raise the cap of FDI in defence sector from 26 per cent, Finance Minister Arun Jaitley, who also holds Defence portfolio, said there will be "full Indian management and control through the FIPB route."
Presenting the General Budget in Parliament, Jaitley said, "Currently, we permit 26 per cent FDI in defence manufacturing. The composite cap of foreign exchange is being raised to 49 per cent with full Indian management and control through the FIPB route."

The step is in line with Prime Minister Narendra Modi's thrust on expansion of the defence industrial base in the country and enhance self-reliance in defence sector besides venturing upon exporting military items.
"India today is a largest buyer of defence equipment in the world and domestic manufacturing capabilities in this area are still in a nascent stage.
"We are buying substantial part of our defence requirements directly from foreign players, companies controlled by foreign governments and foreign private parties are supplying our defence requirements to us and at a considerable outflow of foreign exchange," Jaitley said.

The proposal to raise the FDI cap has been pending for long. During the UPA government, the Commerce Ministry had mooted the proposal a number of times but the then Defence Minister A K Antony had scuttled it, citing "national security interests".

Jaitley, who also allocated Rs 2.29 lakh crore for the Defence, asserted, "There can be no compromise with the defence of the country."
The defence was allocated Rs 2,03,672 crore in 2013-14 and was provided Rs 2,24,000 crore in the interim budget presented by the UPA government in February this year.