Cabinet to consider easing FDI in defence production

As part of the drive to shore up investor confidence and give thrust to manufacturing, government will consider relaxing rules for foreign direct investment in defence production, Commerce and Industry Minister Kamal Nath said today.     

The issue would be taken up by the Union Cabinet in the near future, he said.      "India can become a great manufacturer of defence items. So, we will like to see some easing up there," the minister told reporters on the sidelines of a meeting organised by business chambers with visiting Belgian King Albert II.     

He said the Cabinet would consider options to provide new thrust to the manufacturing sector. Besides, streamlining the procedures for FDI would be on the government agenda.     

Currently, 26 per cent of FDI is permitted in the defence sector.     

Nath said despite troubles in the world economy, India continued to attract FDIs and the target of $35 bn for 2008-09 fiscal would be achieved.     

In September this year, FDI inflows went up by 259 % to $ 2.56 bn, against $ 713 mn in the same month last year.      

For April-September period this year, the inflows went up to $ 17.21 bn from $ 7.25 bn in the comparable period a year ago, showing a rise of 137%.     

The government has made concerted efforts in the last few weeks to limit the impact of shrinking global credit on the Indian economy.     

The Reserve Bank has injected liquidity in excess of Rs 2,60,000 cr, besides reducing the overnight lending rates. The prices of aviation turbine fuel have been cut along with scrapping of the import duty.
The banks are considering lowering interest rates as well.