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Raise FDI cap in defence: US think tank tells India

July 19, 2012 10:15 IST

Indian flagTo boost defence trade, India should raise the foreign direct investment limit from 26 per cent to over 50 per cent in the sector, an eminent United State think tank has appealed.

The Centre for Strategic and International Studies recommended the United States to undertake a comprehensive policy review to determine how to assist India with developing its defense industrial base through co-production and co-development projects.

CSIS in a report urged India and the United States to designate one individual within their respective governments as the points of contact for bilateral defense trade.

"India should increase foreign direct investment to over 50 per cent to incentivise companies to enter the Indian defense market.

"An arrangement where US companies invest in Indian defense industry could provide a win-win for both the United States and India by improving India's defense industry while providing US companies a potential source of lower-cost manufacturing for defense products," CSIS said in a report on Wednesday.

The US think-tank also said India should abolish "No Cost, No Commitment trials," for all vendors.

Eliminating this requirement could greatly reduce the cost of purchased defense equipment for India.

"India should take steps to assure the United States that it can adequately protect sensitive technologies provided to India. Such steps could include detailed information on physical and personnel security measures employed by India to protect transferred technology," it said.

"Refrain from pressuring India about defense agreements (CISMOA, LSA, BECA) in the near to mid-term. Given India's reluctance to developing interoperability with the United States, it makes little sense to pursue these agreements," it said.

"The United States should focus on continuing equipment sales with an eye toward more frequent customization of its products for Indian use, and employ commercial solutions for items that do not require India to sign defense agreements or adhere to one of the four multilateral regimes," CSIS said.

Lalit K Jha in Washington
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