FDI in defence: Enough of ideology, let's get on with the business now

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FDI in defence is a right move
The Union Finance Minister's announcement of increasing the foreign direct investment (FDI) cap to 49% is a right step and was long overdue.

India's geostrategic location necessitates a vibrant defence industrial sector but its government has put up a disastrous performance since independence to make the defence sector an efficient and vibrant one.

NDA has rightly followed the previous regime's initiative

The new government at the Centre has rightly pursued the initiative which was taken up by the previous regime. In May last year, the Congress-led United Progressive Alliance (UPA) government took a significant step to improve the pathetic state of the country's defence industry [read this Hindu report]. It sought proposals from eight foreign vendors for over 50 medium transport aircraft to replace the air force's ageing HS 748 Avros fleet, the report said. What was significant is that the government kept the state-owned Hindustan Aeronautics Limited out of the competition. Can the story be told more clearly?

Can India afford to take small steps towards a big goal?

But can India afford to carry on with small steps for reforms in its defence sector policies?
India has been talking about raising the home-made content in its weapon system for a long time. A panel led by former president APJ Abdul Kalam had said in the mid-1990s that the aim was to increase the indigenous parts of the weaponry from 30 to 70 per cent by 2005. Almost a decade has passed since then and India is still importing 70 per cent of its defence weaponry.

India's defence sector has performed below par

The ordnance and defence public sector units have performed below par and drained the state exchequer, thanks to procrastination and excessive costs. The corruption involved (read VVIP chopper) in the public-foreign partnership has also given rise to more problems.

[Read: Defence scams: Why India continues to depend on foreign deals?]

The country's defense industry has attracted only $4.1 million worth of foreign investment since 2001, when it was first opened to foreign participation in, according to government figures. Industries like services, telecom, and computer software and hardware, on the other hand, have each attracted at least $10 billion in foreign investment between April 2000 and March 2014.

How long can this go on?

High time we shed the Nehruvian protectionism in defence sector

It is high time that the defence sector is freed from the Nehruvian legacy. If we can prove our potentials before the world in sector like automobiles, then why not in defence?

Efficiency is what needed, even if it is through the private sector

The move by Jaitley becomes very relevant in this regard. The announcement of raising foreign investment in defence upto 49 per cent (currently it is 26 per cent) will help the Indian firms attract international capital, technology and knowledge. It will also mark a departure from the prevailing practice of buying modern military articles and spend huge foreign exchange in return.

Protectionism has exposed our defence sector, there lies the irony

The task doesn't end with increasing the FDI cap to 49 per cent for the big foreign firms won't be content short of majority stakes in a new market to make financial commitments. Focus will also be required on aspects of technology transfer and local recruitment in the Indian firms engaged in defence procurement and manufacturing. And not to say of the investment environment in India. Indian politics has no shortage of elements who love to create a ruckus and hinder the way for the evolution of a robust foreign investment policy in the country, thanks to their undying commitment towards pseudo-national feelings.

We have come a long way since 1962, haven't the Chinese?

The defence minister in the last government, AK Antony, had said on the 50th anniversary of the Sino-Indian war of 1962 that India has come a long way since that disaster. Yes, India has. But how much has been that progress in comparison to that of the Chinese?
The government of Modi needs to come out with answers fast.

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