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How 100% FDI in defence will create 2 million jobs | Niti Central
While English-speaking mainstream news channels are worrying themselves sick over whether the removal of no-frisking privileges for Vadra means vendetta or not, some details on the “100 per cent FDI in defence” are coming to light. The draft that proposes 100 per cent FDI in defence was created by Nirmala Seetharaman within two days of taking charge of the new Commerce and Industry Ministry. The Commerce and Industry Ministry has circulated a Cabinet note in order to seek comments from other Government agencies.
Naturally, there are different reactions from different quarters according to affiliations, opinions and ideologies. For instance, the Centre of Indian Trade Unions has issued a statement that allowing 100 per cent FDI in the defence sector will be highly detrimental to the indigenous production. The union also believes that it may also encourage other public sector units push for privatisation. This seems like a self-serving posture.
Critics also say that this will make India more dependent on foreign countries for its defence and research needs. What happens, they speculate, if there are embargoes and sanctions due to whatever reason? All the indigenous production and research facilities will be shut down immediately. They also raise the bogey of these foreign companies getting hold of sensitive information and then passing that information onto other competing or enemy countries?
While there might be some iota of validity if these questions, the benefits of opening up foreign direct investment in defence outweigh apprehensions by a long margin. It will not just upgrade India’s military prowess in little time and with less money, it will also inject a new lease of life in the moribund manufacturing sector where the annual output has fallen to a miniscule 0.2 per cent in the fiscal year ending March 31, 2014. To make matters worse, India’s defence budget is growing at an average rate of 13.4 per cent due to inflation and related factors.
Government mulls over 100 per cent FDI in Defence
Besides, it’s not as if every investor in defence sector will get a free hand and they will run amok once they open their production and research units in India. The FDI will be categorised under various caps such as those who do not transfer technology will be allowed 49 per cent, those who also transfer technology will be able to invest to the tune of 74 per cent and those who manufacture state-of-the-art technology within India will be able to invest 100 per cent. This is quite fair. Companies and research organisations that have invested billions of dollars in research and development won’t just transfer the technology unless they have very good profit earning prospects.
Why not rely on indigenous production units? Although this is a good argument, their performance hasn’t been up to the mark due to inter-Ministerial lobbying and rivalry, bureaucratic hurdles, profiteering and red tape. After so many years India still imports $8 billion worth of defence equipment annually. And how much does India export? $183 million. Even when our defence equipment is produced within India, 70 per cent of the technology and parts used are imported so it hardly makes a difference. What’s the use of simply trying to prove a point when we can access the state-of-the-art defence and surveillance technology that has already been developed and tested in multiple countries?
What about the question of the security of the country being compromised? Well, if we’re already importing most of our equipment and even when we produce our weapons indigenously, 70 per cent of the technology is imported, how can we be sure of how secure these technology transfers are? On the other hand, when the production units are entirely setup within the country, the appropriate agencies will be able to monitor their production, and consequently, ensure more security. Regarding the prospect of countries like America playing spoilsports by imposing embargoes and other restrictive regimes, there is a greater vulnerability if we simply import; when we allow development and production within India, even after embargoes, the technology that is already with us, will remain with us and we can carry on our production irrespective of sanctions.
Once the units are set up in India initially the primary focus will be designing, developing and manufacturing equipment related to counterinsurgency, counterterrorism, surveillance, communication, night vision equipment and rescue operations, to name just a few. India will also be able to export helicopters, sensors, weapon platforms and applications and logistics vehicles to countries like Chile, Ecuador, Colombia, Bolivia and other African and Asian countries.
And yes, 2 million new jobs will be created.
While English-speaking mainstream news channels are worrying themselves sick over whether the removal of no-frisking privileges for Vadra means vendetta or not, some details on the “100 per cent FDI in defence” are coming to light. The draft that proposes 100 per cent FDI in defence was created by Nirmala Seetharaman within two days of taking charge of the new Commerce and Industry Ministry. The Commerce and Industry Ministry has circulated a Cabinet note in order to seek comments from other Government agencies.
Naturally, there are different reactions from different quarters according to affiliations, opinions and ideologies. For instance, the Centre of Indian Trade Unions has issued a statement that allowing 100 per cent FDI in the defence sector will be highly detrimental to the indigenous production. The union also believes that it may also encourage other public sector units push for privatisation. This seems like a self-serving posture.
Critics also say that this will make India more dependent on foreign countries for its defence and research needs. What happens, they speculate, if there are embargoes and sanctions due to whatever reason? All the indigenous production and research facilities will be shut down immediately. They also raise the bogey of these foreign companies getting hold of sensitive information and then passing that information onto other competing or enemy countries?
While there might be some iota of validity if these questions, the benefits of opening up foreign direct investment in defence outweigh apprehensions by a long margin. It will not just upgrade India’s military prowess in little time and with less money, it will also inject a new lease of life in the moribund manufacturing sector where the annual output has fallen to a miniscule 0.2 per cent in the fiscal year ending March 31, 2014. To make matters worse, India’s defence budget is growing at an average rate of 13.4 per cent due to inflation and related factors.
Government mulls over 100 per cent FDI in Defence
Besides, it’s not as if every investor in defence sector will get a free hand and they will run amok once they open their production and research units in India. The FDI will be categorised under various caps such as those who do not transfer technology will be allowed 49 per cent, those who also transfer technology will be able to invest to the tune of 74 per cent and those who manufacture state-of-the-art technology within India will be able to invest 100 per cent. This is quite fair. Companies and research organisations that have invested billions of dollars in research and development won’t just transfer the technology unless they have very good profit earning prospects.
Why not rely on indigenous production units? Although this is a good argument, their performance hasn’t been up to the mark due to inter-Ministerial lobbying and rivalry, bureaucratic hurdles, profiteering and red tape. After so many years India still imports $8 billion worth of defence equipment annually. And how much does India export? $183 million. Even when our defence equipment is produced within India, 70 per cent of the technology and parts used are imported so it hardly makes a difference. What’s the use of simply trying to prove a point when we can access the state-of-the-art defence and surveillance technology that has already been developed and tested in multiple countries?
What about the question of the security of the country being compromised? Well, if we’re already importing most of our equipment and even when we produce our weapons indigenously, 70 per cent of the technology is imported, how can we be sure of how secure these technology transfers are? On the other hand, when the production units are entirely setup within the country, the appropriate agencies will be able to monitor their production, and consequently, ensure more security. Regarding the prospect of countries like America playing spoilsports by imposing embargoes and other restrictive regimes, there is a greater vulnerability if we simply import; when we allow development and production within India, even after embargoes, the technology that is already with us, will remain with us and we can carry on our production irrespective of sanctions.
Once the units are set up in India initially the primary focus will be designing, developing and manufacturing equipment related to counterinsurgency, counterterrorism, surveillance, communication, night vision equipment and rescue operations, to name just a few. India will also be able to export helicopters, sensors, weapon platforms and applications and logistics vehicles to countries like Chile, Ecuador, Colombia, Bolivia and other African and Asian countries.
And yes, 2 million new jobs will be created.
