The Confederation of Indian Industry (CII) today said that the industry is opposed to 100 per cent foreign direct investment (FDI) in the defence sector, even as an inter-ministerial debate raged on the matter.
"The industry is not in favour of 100 per cent FDI in the defence segment," CII said after a recent survey.
However, over half the members of the chamber said that increasing FDI up to 49 per cent would be beneficial for the strategic sector. At present, the government allows 26 per cent FDI in defence production.
The chamber said that even FDI up to 49 per cent should be subject to conditions, including vesting of intellectual property rights of the production technologies with Indian joint ventures coming up in the sector.
Besides, research and development in the sector should be taken up through joint ventures between domestic players and foreign firms, it said. The foreign partner should also ensure that the domestic player gains access to the global market, CII added.
The government is considering liberalisation of the FDI regime in sectors such as defence, agriculture, real estate and multi-brand retail. The Department of Industrial Policy Promotion (DIPP) is likely to put draft proposals in the public domain soon.
Stating that small and medium enterprises are among the major proponents for raising the FDI cap in defence production, CII said they feel it would boost foreign capital inflow and help the country secure key technologies.
Restricting the FDI limit to 26 per cent acts as an inhibiting factor for overseas companies, it added.
Several large foreign original equipment manufacturers are taking up joint ventures in India, expecting the FDI limit to be increased soon.