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FICCI supports the proposal to enhance FDI levels in Defence subject to Strategic Safeguards
Consistent with its support of an aggressive policy towards development and employment via the manufacturing sector, FICCI welcomes the proposal put forth by the Ministry of Commerce and Industry to enhance FDI levels in defence beyond 26% to higher levels up to 49%, 74% or even 100% in exceptional cases, to develop a Defence Industrial Base (DIB), indigenously design & manufacture Defence & Aerospace products tailored to the needs of Indian armed forces, and to create opportunities for employment in the country.

The proposed policy resonates with the relevant portion of the address by the President of India in the joint session of Parliament.

While higher levels of FDI were already allowed in the existing policy, on a case-to-case basis, FICCI sees this proposal in the light of increasing the share of manufacturing in GDP to 25 percent as enshrined in the National Manufacturing Policy.

FICCI recognises the strategic nature of the defence sector and therefore advocates that adequate and mutual strategically beneficial safeguards be put in place while deciding higher levels of FDI in defence production.

Exceptions allowing FDI even up to 100% should be allowed as exceptions, on case to case basis, in cases such as aircraft engines, advanced missile guidance systems, seekers, production of smart materials, high strength carbon fibre etc, for which investments can be justified only by volumes available through integration with the global supply chain of the OEM's .

Obviously, the current level of seventy percent for imports in case of defence equipments, is not in sync with India's aspiration to be a global super power. FICCI strongly advocates the need for absorption of "know-why" in critical defence technologies without which the aim of substantive self-reliance and higher levels of indigenisation cannot be achieved.

India must therefore make use of FDI limit enhancement to leverage its position as one of the largest markets for defence equipment to achieve this strategic goal. It is important to note that no other country with a strong indigenous technical & industrial base allows the levels of FDI in defence that are being offered by India.

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