During his recent visit to France for the delivery of the first 36 Rafale combat jets, Defence Minister Rajnath Singh, while addressing the business heads of French defence industries – asked them to establish their production bases in India. He highlighted – low wages and availability of technical manpower – as one of the key advantages that they could leverage.
He called upon the French companies for collaboration to modernise India’s shipyards and defence platforms by infusion of technology and asked them to make India its base for production of defence equipment not only for India’s large market but also for export to other countries.
The governments push towards generating additional investment in the defence industry will create employment opportunities as well as will enable India to source it’s defence requirements from within. Rajnath Singh, highlighted that significant economic reforms have been undertaken to improve the ease of doing business and opening up the economy for investments.
It was highlighted that India has substantial requirements of Aero engines both in civil and military domains. The Defence Ministry, requested French OEMs to consider exploring development of an Aero engine complex on government -to- government.
The opportunities in India’s defence industry is huge considering that India has the fifth largest defence budget in the world, and procures 60% of its weapon systems from foreign markets. Achieving self- reliance in defence production is a key target for the Government of India, and there are plans to spend $ 130 bn on military modernization in the next 5 years. The Government has already opened up the Defence industry for private sector participation to provide the needed push to indigenous manufacturing. The opening up of the industry also paves the way for foreign original equipment manufacturers to enter into strategic partnerships with Indian companies. Presently 100% FDI is allowed in defence industry; wherein 49% is allowed under automatic route and beyond 49% through Government route.
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