May 29, 2014

Indian Government Will Need To Take A Call On Hiking FDI In Defense

India’s newly appointed Defense Minister Arun Jaitley has inherited the task of deciding whether or not to raise the foreign direct investment (FDI) level in the defence sector from 26 per cent to 49 per cent.

Jaitley, who is also the Finance Minister, would find it easier to address the FDI issue which is not merely a MoD matter but one which concerns the finance and industries ministries as well.

Several foreign companies who wish to partner with Indian companies have held their hand due to the cap on equity holding which would render them a minor player in the partnership. Several partnerships have collapsed due to the restrictions, most notable is the joint venture between Mahindra and Mahindra and BAE System.

The FDI issue is also bogging down the implementation of offsets in India as it is preventing foreign partners from bringing in sufficient capital to kick start their JVs with Indian entities.

Defense world

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