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The government should come up with regular requirements on a yearly or half-yearly basis. This will create more than one option for each and every tender and regularity of supplies
Managing director, MKU Pvt. Ltd, Neeraj Gupta
Interview MKU What are your thoughts on the new government’s proposal of increasing FDI in defence? How do you think you will benefit?
This is a very welcome move from the government. I would say the government should certainly increase Foreign Direct Investment (FDI) from 26 to 49 per cent as a start. This would help bring in foreign capital by way of private equity and immensely benefit small and medium scale companies like ours which are not yet public.

This would make more funds available to the defence sector, which is a new sector in India but a very mature sector in Europe, the US and UK. There are international firms, which understand this market and are willing to invest in India but have so far been deterred by the 26 per cent cap.

But would you prefer the FDI to be 100 per cent?
Hundred per cent FDI is certainly a good move, but we should proceed with caution. It should be allowed in sectors where we do not have the requisite technology in India. It can either be for components or final products. Hundred per cent FDI in the defence sector in India will help create jobs and provide a boost to the manufacturing sector. India could become a part of the global supply chain. This will boost exports and create more employment. More Indians will get trained by these companies, raising their skill levels which ultimately will lead to better absorption of technology and sooner or later, the technology will percolate into the country.

The areas where the FDI will be permitted should be well defined and documented avoiding any ambiguity and confusion like we face in the current defence industrial policy.

Do you prefer the protections systems market to be under 100 per cent FDI?
As this capability already exists in India, this sector should not be included under the 100 per cent FDI. For example, in F-INSAS the government has issued tenders under Buy (India) procurement procedure, where only Indian companies can participate. This implies that Indian companies already have what the Indian government desires. So, there is no requirement for 100 per cent FDI in this sector. But 49 per cent is very welcome as that would help in the R&D efforts of the indigenous companies by making more funds available.

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