India plans to raise foreign ownership in military ventures

NEW DELHI (NewsRise)--India plans to let overseas companies own bigger stakes in defense joint ventures in a renewed push to draw more foreign investment and turn into a global production hub for military hardware.

 

The world's largest arms importer also plans to encourage greater private sector participation in its defense industry, dominated by state-run companies and plagued by long delays in product development.

 

The draft Defence Production Policy 2018, unveiled Thursday, has set an ambitious aim of a more than threefold jump in defense industry revenue to 1.7 trillion rupees ($26 billion) by 2025. By then, it expects the defense industry in the South Asian country to rank amongst the top five globally.

 

"(Foreign Direct Investment) up to 74% under automatic route will be allowed in niche technology areas," according to the draft policy. The defense ministry, which prepared the draft, has sought comments until the end of March. The policy has to be approved by the federal cabinet before it is implemented.

 

Analysts said India's grand goals are challenging, and can only be achieved if the government has a long-term, dedicated strategy toward fostering a local defense industry with active participation of private companies and replacing its archaic procurement policies.

 

"India's objectives sound similar to those of South Korea and Turkey which also want to develop their own defense industries. Reality is, there is not room for everybody up there (in the top five)," said Guy Anderson, a London-based defense industry analyst at Jane's by market researcher IHS Markit.

 

India was the world's largest arms importer in the four years through 2017, making up 12% of globally traded arms, according to the Stockholm International Peace Research Institute, or SIPRI, which tracks global arms sales. "The tensions between India, on the one side, and Pakistan and China, on the other, are fuelling India's growing demand for major weapons, which it remains unable to produce itself," said Siemon Wezeman, senior researcher at SIPRI.

 

India has over the years purchased billions of dollars of military hardware including fighter jets, warships, aircraft and missiles from its biggest supplier, Russia, as well from the United States, France and Israel. The country has been trying to modernize its military to narrow the gap with its belligerent neighbor, China, as well as long-time rival, Pakistan.

 

According to the draft policy, the government plans to pursue selling smaller stakes in state-run defense enterprises and engage more actively with the private industry to exploit the opportunities in the defense sector.

 

Anderson said "India has enormous untapped potential in terms of human capital and capacities". But private sector in the defense industry "is still in its infancy" as state-owned companies still receive most arms deals due to factors such as national security concerns.

 

Source:- Asian