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India allows foreign firms to play a key role in defense production

India allows foreign firms to play a key role in defense production
India allows foreign firms to play a key role in defense production


  • Foreigners would be allowed 74% stake in defense manufacturers
  • Private companies can now take part in India's space exploration activities
  • This move would help the government to increase revenue during COVID-19 pandemic

Bringing a paradigm shift in the Indian space sector that till today had government monopoly, Finance Minister of India, Nirmala Sitharaman, has reportedly announced the entry of private companies in the nation’s future space exploration activities. The government has also decided to increase the FDI (Foreign Direct Investment) limit in defense manufacturing from 49 percent to 74 percent.

Indian Finance Minister claims that the surge in foreign investments would help the nation to decrease a ‘huge defense import bill’ and make India independent in defense production. The nation would also expand the list of defense weapons that couldn’t be imported.

Apparently, policymakers in India are advising the government to cut the spending including defense imports to maintain revenue collections amid coronavirus pandemic.

In February, the Indian government allocated USD 62.1 billion for defense sector in the 2020/21 annual budget including approximately Rs.1 trillion for capital spending. During 2013-2017, India was the largest arms importer in the world, accounting for around 12 percent of total global imports with the United States, Israel, and Russia among the top suppliers. Earlier this year, Prime Minister Narendra Modi set up a goal to double defense exports in the next five years from about USD 2.4 billion a year now.

Commenting on a government’s decision, Atul Pandey, a partner at Khaitan & Co, a law firm that advises defense firms said that this announcement would give a considerable incentive to foreign defense manufacturers that want to retain control in the joint ventures.

Mr. Pandey added that defense manufacturers like Dassault, Raytheon, MBDA, Boeing, Lockheed Martin Corp. which already operating as Joint ventures in the nation could expand their investments.

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Bhushan Tambe

Bhushan Tambe

A qualified computer graduate, Bhushan Tambe always nurtured a passion for words. Post his education, he decided to transform his penchant of penning down poetry and stories into a full-time career. Presently, Bhushan writes numerous articles for and a few other websites, on subjects spanning business, finance, and the like.