India has so far received US$ 5.02 million (INR 32 crore) in Foreign Direct Investment (FDI) in the defense industry sector.
“FDI amounting to US$5.02 million has been received in the Defense Industry Sector so far," Defense Minister Manohar Parrikar said in the parliament today.
“Since the opening of private sector participation in defense, 287 Industrial Licenses have been issued so far,” he added.
India opened the defense sector to private companies in 2001 during the National Democratic Alliance government. The current Narendra Modi government approved a proposal to raise the cap on FDI in defense sector from 26 per cent to 49 per cent August last year in a move to accelerate indigenization.
The raise in the FDI cap so far has had no impact on the defense sector bringing a miniscule 0.08 million (INR 42 lakh) in the past year.
Defense sector contributed just USD 0.08 million (INR 48 lakh) FDI of the total inflow of USD 44,877 million. Figures reveal that since 2000, when the FDI cap was 26 per cent, the country’s cumulative inflow was INR 24 lakh in 2011, INR 17.68 crore in April 2012, INR 24.36 crore in April 2013, and remained unaltered during the previous government.
The statistics further reveal that despite having promoted defense as one of the prime sectors under the ‘Make in India’ initiative, the sector has contributed zero per cent of the total FDI inflow in the country.
The hesitation by global defense manufacturers in bringing investments into a technology-heavy sector such as defense production is linked to the fact that they do not want to end up becoming minority stakeholders in a joint venture with an Indian player. As a result, the transfer of technology is a bone of contention.
Foreign defense sector players also have serious reservations with the offset guidelines.