Government fails to attract FDI in Defence Industry, only Rs 56 lakh since Sept last year

Going by the data presented by Minister of State for Defence Rao Inderjit Singh in parliament on Tuesday, the defence sector stood at the bottom of the list of sectors that received foreign investment this year with merely Rs 56 lakh in its kitty.

This is despite the persistent government efforts to market India as a defence manufacturing hub ever since last year when the norms were eased by the BJP government last year in August, including FII investments upto 24 percent on automatic route.

This dismal FDI inflow was the reason why another set of big changes was announced by the government in November in defence FDI. The changes included FDI upto 49 percent through automatic route, permissions to be taken from FIPB beyond 49 percent, besides FVCI and portfolio being also permitted 49 pc through automatic route.

However, while the government made it easier for foreign investors to venture into the defence manufacturing sector, it shied away from being liberal on the FDI limit, capping it to 49 percent under the new automatic process, a bone of contention for investors who desire a controlling stake.

Other significant sectors like Glue and Gelatin, Dye Stuff and Scientific Instruments beat the investments into the defence sector exponentially.

(image credit: BCCL)