FDI hike in defence to boost economy: FM

Rejecting criticism over the hike in FDI cap in defence sector to 49 per cent, Defence Minister Arun Jaitley on Friday said the step was necessary for boosting domestic industry of a country which imports up to 70 per cent of its military hardware.

Justifying the decision to raise the cap from 26 per cent, he said the country is dependent to a large extent on foreign sources for meeting its defence requirements and they can "stop supplies" during times of war.

"We are importing 70 per cent equipment from foreign sources.

The question is that those who oppose the idea of 49 per cent FDI in defence sector, you can buy 100 per cent equipment from foreign sources but oppose our own...I think the 49 per cent (FDI limit) approach in is larger national interest," Jaitley said replying to a Lok Sabha debate on Budget.

He also replied to a suggestion by a member that if FDI limit in defence could be raised to 49 per cent, it could have well been increased to 51 per cent.

This, the Minister said, would have allowed foreign firms to have control over such companies and "meant only the shifting of location of these foreign companies from foreign locations to India."

He said the cap was kept at 49 per cent so that the control of these companies is with Indians.

The Minister said the sector was opened by the Vajpayee government when it allowed 26 per cent FDI and saw the entry of Indian majors such as Tata, Mahindra and other groups in it.

He said UPA government's offsets policy which makes it mandatory for the foreign vendors to reinvest at least 30 per cent of the worth of any contract above Rs 300 crore (Rs 3 billion) into Indian market was also helping the growth of the sector.

Jaitley praised the DRDO saying it was "doing quite a lot to meet the requirements of the armed forces but the Services need much more and that will come through domestic industry."