India hikes foreign investment limit in defence manufacturing

By OEM Update Editorial May 22, 2020 4:02 pm IST

In a bid for ‘self-reliance’ Nirmala Sitharaman announced that the import of certain weapons and platforms is going to be banned. On the flip side, the FDI limit for defence has also been increased from 49percent to 74percent with Sitharaman assuring viewers that safeguards will be put in place to protect a sector as sensitive as defence.

Banning the import of defence equipment The import of this set of equipment shall not be allowed, it will be banned,” Sitharamn said during the fourth instalment of announcements around India’s 320 latch more stimulus today, May 16. Instead, the armed forces will now have to look to local manufacturers — or at least companies that have set up manufacturing bases in India—in order to meet their requirements. A list will be issued, but as now, she hasn’t specified exactly which defence equipment will be taking a hit — and it’s going to increase every year. “Every year this list will be increased as more capacities are recognised, which meet the defence standards, and they will be obtained from India,” Sitharaman explained.

In addition to banning the import of weapons, import spares will be used for indigenisation of manufacturing and the budget will include separate provisioning for domestic capital procurement. ‘Corporatisation, not privatisation” The Ordnance Factory Boards under the Military of Defence, which engage in research, development, production, and testing of defence equipment will also be corporatised. “Coorporatisation is not privatisation. We want them to be better managed, and we also eventually hope that they will get listed in the stock market,” said Sitharaman.

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