At a time when India is making efforts to reduce its defence import bill and develop defence manufacturing through ‘Make in India’ initiative, the Foreign Direct Investment (FDI) figures shared by the government shows little interest of the world in Indian defence sector.
According to the government’s figure given in the Parliament, India received FDI of around $0.18 million “in defence industry sector from April 2014 to December 2017.” Going by the current conversion rate, this amount comes to 1.17 crore.
This information was given by Minister of State for Defence Dr Subhash Bhamre in a written reply in Lok Sabha on March 7, 2018.
In 2016, India revised its FDI policy on various sectors including defence. In the new policy, FDI up to 49 per cent “is under automatic route and beyond 49 per cent is through government route wherever it is likely to result in access to modern technology or for other reasons to be recorded.”
Last year, Government informed Parliament, “In the year 2014-15, FDI of $0.77 lakh and $0.01 lakh has been received from France and Israel respectively. In the year 2015-16, FDI of $0.95 lakh has been received from France. In the year 2016-17, FDI of $0.01 lakh has been received from Israel.”
These figures clearly show that the foreign investors are not interested in making direct investment in Indian companies. Instead of investment, foreign players tends to form joint ventures with Indian private and public sector for participation in defence contracts where if selected Indian companies would establish factories and foreign partner would support through technology transfer for manufacturing of goods in India.
In last few years, global majors have started fully owned Indian subsidiary, which does not require much FDI.