Raise FDI limit to boost defence trade: US think tank

By Arun Kumar, IANS,

Washington : A US think tank has suggested that India should raise the limit of foreign direct investment from 26 percent to over 50 percent in order to incentivise US companies to invest in its defence industry.

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Raising the FDI limit is one of the recommendations in five key areas for both the United States and India made by the Centre for Strategic and International Studies to help “unlock the full potential” of their defence partnership.

To meet strategic challenges, the report suggests that the US and India engage in an in-depth discussion about India’s defence needs that stems from a joint vision for the strategic defence relationship and should designate one official on each side to promote bilateral defence trade.

In the area of political challenges, the report suggests that the United States needs to be consistent and reliable in its technology transfer decisions and in its provision of purchased defence equipment.

In turn, the Indian government should craft a public narrative about the benefits of mutual partnership to counter negative perceptions within the Indian political system, it said.

To meet procedural and technical challenges, the report suggested that the US and India should actively work to develop ways to accommodate the Foreign Military Sales system within the Indian Defence Procurement Procedure (DPP).

India should develop an offset strategy that clearly lays out the technologies and capabilities India hopes to derive from the offset programme and also consider indirect offsets to be applied toward India’s many infrastructure and related needs, it said.

To overcome bureaucratic challenges, the report suggests that the two countries should seek to facilitate greater transparency and predictability between their respective bureaucracies.

Finally both sides should engage in a bilateral dialogue about the key elements of an effective defence industrial base.

The United States should intensify its efforts to engage the various constituencies in India that shape public opinion, including the media, parliament, and state governments.

It should also continue to engage the Indian bureaucracy and offer assistance in developing India’s defence acquisition expertise, the report said.

India, in turn, should publicly communicate its defence acquisition priorities to facilitate better planning for acquisition and sales, it said.

Noting that US-India defence trade has undergone a remarkable transformation over the past decade with American companies assuming a larger share of the Indian defence market, the report suggested that implementing its recommendations will take the India-US partnership to a deeper level.

(Arun Kumar can be contacted at [email protected])