Ministerial group considering hike in defence FDI

The issue of hiking the Foreign Direct Investment (FDI) limit in the defense sector from 26 percent to 49 percent is now being debated by a group of ministers, an official said on Tuesday.

Defense Production Secretary Raj Kumar Singh said the Commerce Ministry proposal to increase the FDI limit from the existing 26 percent was under the consideration of the ministerial group.

But he did not name the ministers who are part of the committee. He, however, said the ministerial group is not an official one, but an informal arrangement. “The ministry has proposed that the FDI limit should be increased to 49 percent. That proposal was received by our ministry and it is under discussion by a group of ministers.”

“It is not a proper empowered group of ministers or an official group of ministers. It is a group of two-three ministers,” Raj Kumar Singh said.

The Department of Industrial Policy and Promotion (DIPP) had mooted that the FDI cap in defense should be raised to 74 percent to attract greater overseas investment in the sector. Similar demands have been made by various industry chambers. India is considered to be the 10th largest defense spender in the world as it imports 70 percent of its defense requirements. The country is expected to spend about $50 billion in the next five years on modernization of its armed forces and for weapons procurement.