Tarmak007 -- A bold blog on Indian defence: Defence FDI: Experts choose to wait 'n' watch

Friday, July 11, 2014

Defence FDI: Experts choose to wait 'n' watch

By Anantha Krishnan M
Express News Service
Bangalore: The expected announcement by the government to hike the Foreign Direct Investment (FDI) limit to 49 per cent from 26 per cent in defence sector has evoked a balanced response. Terming the move neither as a great boon for defence capability build up nor a calamity for indigenous design and production, Dr K G Narayanan, former Chief Advisor, Defence Research and Development Organisation (DRDO), said that even higher levels of FDI can be infused in unavoidable 'Buy and Make option' cases, with advantage and no great harm being done to the Indian economy, technological capabilities and national security.
"But, the government should declare with sincerity and seriousness, that substantial self reliance will be achieved within a reasonably short period of 10 years as a national goal and also introduce effective implementation measures to achieve it. In the absence of such a proclaimed national commitment and consequent changes in attitudes of the armed forces, defence production and defence research departments, it would be naive to expect restrictions on FDI ceiling to come to the aid of domestic technology agencies, public or private," Dr Narayanan, said. He felt it is equally naive to expect high technology to flow into Indian industry simply because foreign firms can invest more and repatriate more profits.
"There is a great difference between local manufacture of weapons containing high technology and manufacture of weapons containing high technology created or assimilated locally. These vastly different options are frequently, perhaps even deliberately, confused and taken to be same while arguing in favour of higher limits for FDI," Dr Narayanan felt.
Ashok Kumar Baweja, Head of Quest Global Defence Engineering Services, welcomed the governments move and hoped that the provision to enhance the limit on a case to case basis too be in place. "To hike the FDI limit has been a long-pending demand as the previous 26 per cent was very less. Foreign companies were hesitant to invest and things would get cleared now. It's a very careful decision and once the policy is made it will be easy to make exceptions in a case to case basis. Let's wait and see what happens," said Baweja, who was the former chairman of Hindustan Aeronautics Ltd.
Saying that the raise in FDI limit would benefit the MSMEs, Col (Redt) H S Shankar, Chairman and Managing Director, Alpha Design Technologies Pvt Ltd, however wanted the FDI to come through the direct route and not via Foreign Investment Promotion Board (FIPB). "While the MSMEs are bound to gain from the move, the established big industries in India will be left with no choice but to compete with the global players now. With respect to investments in plants, machinery and test equipment the OEMs can be made to share 49 per cent of the cost, instead of earlier 26 per cent. This will help Indian industries," said Col Shankar, who was the former Director (R&D) of Bharat Electronic Ltd, said.
Copyright@The New Indian Express

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