Defence Sector – DPP, Missions, Schemes, Security Forces, etc.

Draft defence production policy aims to raise FDI cap in niche tech to 74%


Mains Paper 2: Governance | Government policies & interventions for development in various sectors & issues arising out of their design & implementation

From UPSC perspective, the following things are important:

Prelims level: Draft Defence Production Policy 2018, Make in India, FDI, Artificial Intelligence

Mains level: India’s rising defense imports and need for indigenous production

Draft Defence Production Policy 2018

  1. It aims to create an environment that encourages a dynamic, robust and competitive defence industry, as an important part of the Make in India initiative
  2. The policy proposes to increase the foreign direct investment (FDI) cap in niche technology areas to 74% under the automatic route
  3. At present, the FDI cap for the defense sector is 49% under the automatic route for all categories

Why more focus on ‘Make in India’?

  1. India is currently the top importer of defense hardware in the world (according to the Stockholm International Peace Research Institute)
  2. By giving a leg-up to defense manufacturing, Asia’s third largest economy also hopes to transform itself into a “global leader in cyberspace and AI (artificial intelligence) technologies

Proposals in the policy

  1. India hopes to achieve a turnover of Rs1.7 trillion in defense goods and services by 2025
  2. It has a goal of becoming an arms exporter to the tune of Rs35,000 crore in defense goods and services by 2025
  3. The government will list its requirements in terms of platforms and weapon systems for the next decade to help private sector companies understand the opportunities
  4. It will also simplify procedures for private firms to enter defense production, i.e., liberalize the regime by issuing licenses in 30 days and pruning no-go areas to a small ‘negative list’ for licensing
  5. The government will also do away with capacity assessment, except for critical projects
  6. In the area of taxation, the government has proposed rationalization of taxes on import of capital goods for services and inputs for defense and aims to prevent inversion of taxes
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