tushar
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NEW DELHI: After a long hiatus, the government seems to be getting serious about liberalization of the foreign direct investment regime. The government is set to revive discussions on increasing the FDI limit in defence production from 26% to 49%. And this time, the proposal -- which was on the backburner for nearly a year in the face of intense opposition from the defence ministry -- seems to be getting some support from South Block.
On Wednesday, the Union Cabinet permitted FDI in limited liability partnership firms, which is a hybrid structure between a partnership firm and a company. The proposal on FDI in defence, if approved, would only leave the government with allowing foreign investment in multi-brand retail, something that is being keenly watched by international chains like Wal-Mart and Carrefour.
The movement on the FDI policy front also coincides with the conclusion of election in five crucial states where the Congress is widely expected to emerge stronger. Sources said a fresh note on defence production is expected to be taken up for discussion by a ministerial panel headed by finance minister Pranab Mukherjee.
Defence minister A K Antony, who had put his foot down on the proposal floated by the department of industrial policy and promotion for hiking the ceiling to 74%, is expected to back a move to increase the cap to 49%, something which is seen as finding middle ground. Antony had earlier argued that 26% was "enough at the moment". Senior members of the Cabinet are supporting the proposal to raise the FDI ceiling for defence. Among the arguments in favour of hiking FDI is that the 26% limit has not enthused foreign investors, who have only put in around $30 million in the defence sector in all these years.
Argument is also that the present regime is actually favouring illegal activities of arms agents, who are manipulating Indian defence procurement for various foreign vendors. While the government has failed to keep them out of the business, their flourishing control over the sector is because of lack of powerful domestic players. Increased FDI would also help small and medium enterprises to get long-term investments, which is denied to them by traditional banking channels because of the long gestation period involved in defence projects.
Govt renews FDI push, defence in sight - The Times of India
On Wednesday, the Union Cabinet permitted FDI in limited liability partnership firms, which is a hybrid structure between a partnership firm and a company. The proposal on FDI in defence, if approved, would only leave the government with allowing foreign investment in multi-brand retail, something that is being keenly watched by international chains like Wal-Mart and Carrefour.
The movement on the FDI policy front also coincides with the conclusion of election in five crucial states where the Congress is widely expected to emerge stronger. Sources said a fresh note on defence production is expected to be taken up for discussion by a ministerial panel headed by finance minister Pranab Mukherjee.
Defence minister A K Antony, who had put his foot down on the proposal floated by the department of industrial policy and promotion for hiking the ceiling to 74%, is expected to back a move to increase the cap to 49%, something which is seen as finding middle ground. Antony had earlier argued that 26% was "enough at the moment". Senior members of the Cabinet are supporting the proposal to raise the FDI ceiling for defence. Among the arguments in favour of hiking FDI is that the 26% limit has not enthused foreign investors, who have only put in around $30 million in the defence sector in all these years.
Argument is also that the present regime is actually favouring illegal activities of arms agents, who are manipulating Indian defence procurement for various foreign vendors. While the government has failed to keep them out of the business, their flourishing control over the sector is because of lack of powerful domestic players. Increased FDI would also help small and medium enterprises to get long-term investments, which is denied to them by traditional banking channels because of the long gestation period involved in defence projects.
Govt renews FDI push, defence in sight - The Times of India
