Gopalakrishnan: Tech tips

New Delhi, April 16: CII president S. Gopalakrishnan (Kris) has sought a long-term foreign direct investment policy for the defence sector to encourage multinational firms to set up shop here.

“There is a need to bring in FDI in defence so that we can bring in the best technologies available in the world. Production of defence goods should become more localised instead of the present trend of India just importing its defence requirements,” Gopalakrishnan said.

The Infosys chief stressed the need for Indian firms to invest in R&D and production to make the country self-reliant.

The CII maintains that the setting up of production bases by overseas manufacturers will lead to the transfer of high-end technology and growth in local production.

India opened up its defence equipment industry to the private sector in May 2001 but restricted foreign participation to 26 per cent. The country is one of the largest defence importers but has a minuscule share in exports.

Many analysts say the low FDI levels discourage MNCs from investing in local facilities as they fear the transfer of technology to a firm where Indians own a majority will not yield enough returns to them.

Domestic firms such as L&T and Mahindra & Mahindra, which have invested in defence manufacturing, want the FDI limit to be raised to 49 per cent, while foreign embassies have been lobbying for 51 per cent to 100 per cent shares.

Commerce and industry minister Anand Sharma has written to defence minister A.K. Antony to consider a proposal to hike the cap to 49 per cent.

Gopalakrishnan said the FDI percentage was a policy matter and should be decided according to the requirement.

“The current limit of 26 per cent is not enough for transfer of state-of-the-art proprietary technologies. The fact that in the last decade we have received only $4.12 million of FDI inflow in defence manufacturing is a clear testimony to this fact,” Sharma had said.

Gopalakrishnan said the CII would lobby for the transfer of technology to promote local capabilities.

“However the aim should be to become self reliant and for this reason the CII would be promoting transfer of technology in defence procurement. Also we would be pushing for innovation-led entrepreneurial shift in defence and aerospace,” he said.

Also, the CII will be promoting defence-based micro, small and medium enterprises, which will produce ancillary items required by the bigger defence firms.