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Budget 2014: FDI in defence good for technology transfer, says Sanjay Puri

NEW DELHI: The announcement by Finance Minister Arun Jaitley to hike Foreign Direct Investment in the defence sector to 49%, up from 26% now, while keeping management control in domestic hands, was appreciated by Sanjay Puri, Chairman, US India Political Action Committee (USINPAC).

“We welcome the increase in FDI cap in the defense and insurance sectors. Increased FDI in defense means not only more equity investments coming into India, but more importantly the technology transfer that will accompany such investments,” Puri said.

“This combination of more money and technology transfer will go a long way in helping India to stand up its own robust manufacturing and industrial production base, and also generate jobs in the manufacturing sectors. Whereas the hike in FDI in the insurance sectors will aid in the expansion of the insurance industry in India so that social safety nets, particularly for healthcare and innovations in low-cost and affordable insurance,can expand to reach more and more citizens of India,” the Chairman of USINPAC said.

Both of these developments are indeed commendable and global investors, including from the Indian Diasporas, will now be encouraged to participate in the development of the defense and insurance industries of India, he added.

During the Budget speech Jaitley had said that India is the largest buyer of defence equipment and the move to increase FDI in the sector will help boost domestic capacity.

The government’s decision is in line with the promises made by BJP during the election campaign to scale up India’s domestic defence industrial manufacturing base.

Industry bodies such as the Confederation of Indian Industry had wanted the Finance minister to restrict FDI in defence to 49%, with anything above this being considered on a case-to-case basis.

Indian companies, particularly engineering major Larsen & Toubro, have made significant investments in the defence sector and have been opposing the move to allow up to 100% FDI, saying that this wouldn’t be in the national interest.

“We should agree to 49%, subject to genuine transfer of technology. But nowhere in the world, even in the most advanced nations like the US, where they have in a hi-tech defense sector, do they allow foreign companies to own a majority stake,” L&T chairman AM Naik had told ET in an interview last month.

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