The defence ministry had told the Lok Sabha in March this year that FDI inflow in the defence sector since

by Manu Pubby

New Delhi: Under fire for dismal statistics that showed a minuscule inflow of foreign direct investment in the defence sector, the government has formulated a multi-fold increase in the numbers. 

The defence ministry had told the Lok Sabha in March this year that FDI inflow in the defence sector since April 2014 was Rs 1.16 crore. This was in response to a question on inflow under the ‘Make in India’ scheme. The dismal numbers reflected the lukewarm response of foreign players to the opening up of the defence sector.

But now, through a fresh formula that was presented in the Rajya Sabha this week, the defence ministry has claimed that the total FDI was in excess of Rs 437 crore. The numbers were given by minister of state for defence Subhash Bhamre in response to a query raised by a member seeking to know the reasons behind the low inflow of funds.

Justifying the upward revision of over 350 times, the minister said the earlier number shared pertained only to the ‘three National Industrial Classification (NIC) codes of defence sector’. These codes classify business activities and are vital to policy formulation and implementation.

Adding to this figure of Rs 1.16 crore, Bhamre has claimed that Rs 237.44 crore worth of FDI approval (not inflow) has also been accorded under ‘other NIC codes’ in the defence and aerospace sector. The minister said that six such cases have been processed since 2014. 

Officials explained that not all defence industry activity was for the three codes mentioned above and FDI had flown in under other business heads. It is unclear though how much of this was for the defence sector and what part for the aerospace segment that also has civilian application.

In addition, the MoD has informed the Rajya Sabha that with the liberalised policy on defence licensing, more funds have come in through the automatic route that does not require any permission as long as it is within the 49% limit. 

“According to industry information, in addition to six cases mentioned above, FDI of over Rs 200 crore has been received under defence and aerospace sector in 14 cases through automatic route,” the minister informed Parliament. 

FDI in defence has been a touchy topic for the government, with foreign players not yet taking the plunge due to multiple factors, including a lack of clarity on a new defence production policy that is still in the works. Foreign companies are also holding back investments till the time they get large committed orders that are to come under the strategic partnerships model, which has been hit by a series of delays.