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India confirms 44 defence joint ventures

Foreign companies in India have formed more than 40 defence joint ventures (JVs) with local firms, India’s Minister of State for Defence Shripad Naik has confirmed in parliament.

In his parliamentary reply, Naik said 44 proposals for foreign direct investment (FDI) and JVs have now been approved by the government in the area of defence manufacturing.

Defence products manufactured by the JVs, he said, included fixed-wing aircraft, aero-structures and components, simulators, unmanned aerial systems, optical devices, radar systems, mortars, and military vehicles.

Naik said that by January the value of foreign investment in India’s defence and aerospace sectors had reached INR4.19 billion (USD57.6 million).

In his reply, Naik did not provide a breakdown for defence. However, statistics published by the government’s Department for Promotion of Industry and Internal Trade in December 2020 show that the value of FDI in defence up to that month was INR615 million (USD8.45 million).

Naik said that India was committed to attracting greater levels of foreign investment in the defence sector through various initiatives introduced as part of recent updates to the country’s defence procurement rules.

These rules, known as the Defence Acquisition Procedure (DAP) 2020, include provisions for ’non-equity investments’ to support co-production activity within India, procurement known as ’Buy and Make (Indian)’ through which foreign firms support local platform production through transfer technologies, and procurement known as ‘Buy (Global-Manufacture in India)’ through which localised component manufacturing can proceed.

Additionally, in 2020 the government increased the cap on FDI in defence from 49% to 74%. This applies to FDI through the ‘automatic route’, which in theory requires no government approvals. In practice, proposals are scrutinised on national security grounds.

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