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India's decision on FDI a positive step: US defense industry

India's Decision To Increase FDI In Defence Is Seen As A Long-awaited Positive Move In The US, But Major American Defense Industry Players Noted That There Is Unlikely To Be A Rush Towards The Country Unless New Delhi Is Ready With Fairly Applied Regulations.

PTI | Updated on: 18 Jul 2013, 07:57:18 PM


India's decision to increase FDI in defence is seen as a long-awaited positive move in the US, but major American defense industry players noted that there is unlikely to be a rush towards the country unless New Delhi is ready with fairly applied regulations.

"The announcement on FDI in defence reflects positive movement and we welcome that," a Boeing spokesperson said.

"However, we await the final details to understand the meaningful changes this would bring to the defense sector and local industry," the spokesperson said.

Opening the doors to shore up foreign investments, India on Tuesday liberalised FDI limits in a dozen sectors, including allowing higher limits in 'state-of-the-art' defence manufacturing, to boost the sagging economy.

The Pentagon noted this as a positive development.

"DoD (Department of Defense) views this change as a positive indicator that India is considering reform in its defense sector," Pentagon spokesman Lt Col Jeff Pool said.

While there was no other on the record reaction from the government or from defense sector companies, private industry players said the increasing FDI in defense to 49 per cent would change the dynamics and would attract a huge amount of investment not only from American companies but others also.

"Forty-nine per cent is a positive step forward, but it does not undercut indigenization. It is going to allow for further indigenisation, because more companies would be wanting to invest in the production and manufacturing capabilities of Indian companies," said a private defense sector player.

There is a feeling in the US defense sector that in taking such a decision the strong views of Defense Minister A K Antony has been overruled by Prime Minister Manmohan Singh.

The increase in FDI to 49 per cent in the defense sector, a private industry player argued, would result in more indigenization of defense products.

"Forty-nine per cent means, more companies would be interested in going to India," he said, but cautioned that Indians should not expect an immediate impact on its FDI.

"This is not going to happen overnight, even by FY-2017 or 2018. Companies would have to do their evaluative process and until the regulations are very clear and fairly applied, as to what company is given what FDI percentage, only then we will see foreign companies be interested in actually taking the next step forward," he said.

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First Published : 18 Jul 2013, 07:56:00 PM