Finance Minister Nirmala Sitaraman, last week, announced a slew of measures as a part of the Rs 20 lakh crore stimulus package meant to restart the Indian economy.
The announcement also included several reforms across the sector to make India a self-reliant country.
Among the key reform measure includes procurement of spares used by the defence sector, which are made in India. And, to promote indigenisation of defence production under its ‘Make in India’ initiative, the government declared raising the foreign direct investment (FDI) cap from 49% to 74% via the automatic route.
The reforms aim to reduce India’s massive defence import bill. According to the Stockholm International Peace Research Institute (SIPRI), the US, China and India were the world’s three biggest military spenders in 2019, followed by Russia and Saudi Arabia. The two Asian countries made it to the top three for the first time, SIPRI said in a report last month.
India’s government will soon put out a list of weapons and platforms that will only be purchased from domestic industries and not from foreign vendors. This list will be expanded every year in consultation with the armed forces.
India has inaugurated two defence industrial corridors, in Tamil Nadu and in Uttar Pradesh, to boost the flagship ‘Make in India’ programme that in turn would attract investments as well as encourage employment generation.
Prime minister Narendra Modi in February had set a target of $5 billion for India’s defence exports in the next five years at the inauguration of the 11th Defence Expo in Lucknow.
Among private sector, companies such as Larsen & Toubro, Bharat Forge, Mahindra & Mahindra, Reliance Defence, Ashok Leyland, etc are likely to take advantage of the change in FDI norms.
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L&T is manufacturing 100 Vajra self-propelled K-9 Howitzer at its factory in Gujarat.