A shot in the arm for defence sector with increased FDI limit to 49%

A move aimed at giving a boost to domestic manufacturing of defence equipment, the government has decided to allow 49% Foreign Direct Investment (FDI) in defence manufacturing. In his Budget speech, the Finance Minister Arun Jaitley said that composite cap of foreign exchange is being raised from the existing 26% FDI to 49% in defence manufacturing with full Indian management and control through the FIPB route.
 
With 49% FDI limit, global equipment manufacturers would like to explore opportunities to set up manufacturing unit in India, one of the largest defence importers in the world.
 
If the move results in increase in manufacturing activity in defence sector, then it will enhance the country's capacity to produce defence equipment locally and also help in saving foreign exchange. India at present imports over $ 8 billion worth of defence equipment and its defence budget is growing at an average of 13.4% annually since 2006-07.
 
Arun Jaitley also emphasised on the importance of modernisation of the armed forces and proposed to increase the capital outlay for defence modernisation by Rs 5,000 crore over the amount provided for in the interim Budget. This includes a sum of Rs 1,000 crore for accelerating the development of the Railways system in the border areas. He said urgent steps would also be taken to stream line the procurement process to make it speedy and more efficient.