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Mixed reactions to India's plan to increase defence FDI

The Indian government on Thursday proposed raising the country's foreign direct investment (FDI) limit to 49 per cent in the defence sector. While the move has largely been welcomed by experts and local industry manufacturers, critics said the proposal may endanger India's security.

NEW DELHI: With the aim of boosting its defence capacity, the Indian government on Thursday proposed raising the country's foreign direct investment (FDI) limit to 49 per cent in the defence sector.

The decision came in the country's Union budget, presented in parliament by Finance Minister Arun Jaitley.

The move has largely been welcomed by experts and local industry manufacturers, hoping it will give the domestic industry a greater role in producing modern equipment with foreign investment.

Critics, however, said the proposal is likely to endanger India's security.

India is among the largest importers of defence equipment in the world and last year alone spent US$6 billion on buying weapons.

Despite such a large demand, the local industry manufactures almost no weapons or equipment other than some ballistic missiles.

Jagdambika Pal, leader of the ruling Bharatiya Janata Party, said: "Presently, we are largely dependent on imports. Now the government's proposal to allow 49-per cent FDI in the coming days means most of the weapons will be produced locally, under complete Indian control. So, allowing this will help in boosting development."

Defence analyst Uday Bhaskar said: "The requirement is to ensure that our existing base for defence production is appropriately modernised and we are able to get the latest both in terms of manufacturing technique and in technology transfers. And at the end of the day the holy grail is the ability to design military equipment."

But the opposition Congress has criticised the move, saying the proposal will compromise India's security.

Former defence minister A K Antony said: "My own feeling is that gradually all the Indian private sector defence production units will be controlled by foreign multinationals, which will affect our national security. It will affect our sovereignty that can indirectly influence all our foreign policy also."

The increase of the FDI limit will inject capital into the cash-strapped sector and allow Indian weapon makers to get access to modernised techniques by collaborating with foreign manufacturers.

But the Indian government still needs to clarify its technology transfer rules in order to enable local manufacturers to benefit from the scheme 

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