Carl-Gustaf M4 system by SAAB

Sweden's Saab has reportedly become the first foreign company that has bagged 100% FDI in India's defence projects. According to a report by the Economic Times, Sweden's Saab will set up a new facility in the country that will manufacture shoulder-fired rockets.

Citing sources, the English daily added that the ₹500 crore FDI proposal was cleared last month. Mint could not independently verify the report.

Currently, India allows only 74% FDI in the defence sector under the automatic route. Beyond that, clearance can be obtained on a case-by-case basis. However, the clearance rules were relaxed in 2015, still, no foreign firm was able to get permission for 100% FDI in defence.

The Government has liberalised and allowed FDI under automatic route up to 74% and up to 100% through Government route wherever it is likely to result in access to modern technology.

India received foreign direct investment (FDI) worth $3.21 million in defence industries during April-September period in FY 2023. The sector had attracted $2.36 million foreign investment in 2021-22, $0.63 million in 2020-21, $2.20 million in 2019-20, $2.18 million in 2018-19 and $0.01 million in 2017-18, according to Centre's data.

What Will SAAB Do?

Saab FFV India has been registered as per the ET report and will make the latest generation of the Carl-Gustaf M4 system. This will be the first time Saab will manufacture Carl-Gustaf M4 outside Sweden. The facility of Saab is likely to come up in Haryana.

The shoulder-fired rockets are used by Indian armed forces extensively, and countries like the US, and European nations also use them to take down fortified enemy positions, armour, and personnel.

In 2016, French firm DCNS became the first foreign company to seek approval of 100% FDI to set up a subsidiary to develop advanced systems that would give submarines more underwater endurance, ET reported.

The French firm has sought to invest over ₹100 crore in the Indian subsidiary (DCNS India Pvt Ltd) to develop high-end critical defence technologies but it did not get permission.