.Will increasing Foreign Direct Investment in defence sector boost indigenisation? Critically comment.

ABHISHEK KUMAR (C7)

June 10, 2014 at 10:11 am
The increasing FDI in defence sector has always been a contentious issue having supporters of
both the end. However, the most prominent view in its support is the indigenisation of foreign
technologies and local manufacturing will also cut down the cost.
However, indigenisation just by increasing the FDI does not seem to be a reality as the foreign
vendor cant just transfer its technologies by the approval of its board. The permission has to
explicitly come from the concerned government, which does not seem a possibility all the time.
Alongside, the increased FDI in no sense will bring latest technologies to manufacture in the
country.
Instead of pressing more for manufacturing in the country, the thrust should be given to the
indignation of manufacturing design in which a defence tool (such as Tanks, warships, fighter
aircraft, etc) could be built in the country while still using foreign built parts and engines. It will
later pay the way for technology transfer as well.
Defence is an extremely important pillar of the nations integrity and utmost attention to
modernize it should be given. However, focussing more upon our abilities with limited foreign
dependency will make us truly secure and independent.





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SS
June 10, 2014 at 10:27 am
The question of FDI in defence has to be considered in the backdrop of our present status
regarding our defences. Our relations with two of our neighbours are still volatile and the threat
of fighting a war on two fronts has still not been neutralized. What sort of defences are we
putting up for our protection? It is estimated that only 10% of our defence equipment is state of
art as of today. Almost 50% of the equipment has become obsolete. We are in real need of atleast
partially building up of our defences at the earliest, in order to fight back or hold up against the
possible war. A major revamp of our defence development strategy is imperative.
Increasing FDI alone will not do the trick. Even when permitted 100%, the vendors cannot
transfer technology to India without the explicit sanction of their home government. As a result
of which we are bogged down by working on equipment that are already decades old.
One way to solve this problem would be for us to purchase easily available technology and
components from foreign vendors and putting our technical team to modify it into a whole new
product. Such an indigenised version of over the counter machinery will help develop the
expertise level of our technical team, which can in future be employed to develop wholly
indigenised state of art equipment. Increasing the cap of FDI from 26 to 49% will help ease our
purchases of such over the counter equipment and also pump in the much needed capital for such
ventures, without compromising the majority stake holder position of Indian government in such
companies.





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Ram Sharma
June 10, 2014 at 11:02 am
Will increasing Foreign Direct Investment in defence sector boost indigenisation?
Critically comment.
The government has allowed 26 per cent Foreign Direct Investment in the defence sector.
Newspaper reports have suggested that the government is considering opening this sector
for more FDI inflow. However, it is easily forgotten, that since 2006 the government has
been allowing FDI in defence sector upto 100 per cent on a case-by-case basis. While the
proponents of liberalisation in the defence sector had argued that this would result in
foreign companies setting up manufacturing facilities in India, the story so far has been
different as no foreign company has shown any interest. These companies have preferred
India buying arms directly. Statecraft is an important element of this trend.
Hence, the solution for defence indigenisation is not as simple as it is being made out to
be. The process of indigenisation will be slow and painful. But, it is the desired goal
which no government can afford to ignore. So, the need of the hour is for the government
to create possibilities for India to exercise its potential in areas where it is strong. The
beginning can be made in the design sector, where Indian companies are showing their
prowess. This can then be carried forward to manufacturing within India, even if it means
buying engines from foreign companies.
The debate on indigenisation of Indias defence needs to be seen from the perspective of
security of our frontiers. While, there is no doubt that the Indian armed forces are ready
to face challenge from any quarter, there are questions over whether the armed forces are
ready for a 21st century war. Hence, while indigenisation needs to be the desired goal, it
should not mean that the country postpones buying essential equipment to keep its
frontiers secured.