India hosts fewer foreign defence firms despite largest importer tag

India hosts a relatively low number of large foreign defence manufacturers considering that it has been among the world’s largest arms importers for decades and has a policy of domestic arms — industrial development, according to a report by Stockholm International Peace Research Institute (SIPRI).

The report looked at the international presence of the 15 largest arms companies in 2019. These companies are present in a total of 49 countries, through majority-owned subsidiaries, joint ventures and research facilities.

The report said that it identified 13 foreign entities in India. However, only two are involved in manufacturing activities.

Airbus, BAE Systems, Boeing, General Dynamics, L3Harris Technologies, Leonardo, Lockheed Martin and Thales all have foreign entities in India.

UK hosts the most entities about 14 per cent of the total for the 15 largest arms companies. This was followed by Australia (9.5 per cent), the USA (9.0 per cent), Canada (7.5 per cent), Germany (7.3 per cent), Saudi Arabia (6.0 per cent), Italy (3.8 per cent) and India (3.3 per cent).

With a global presence spanning 24 countries each, Thales and Airbus are the two most internationalised companies — followed closely by Boeing

(21 countries), Leonardo

(21 countries) and Lockheed Martin (19 countries).

The report said that low presence of foreign companies could be explained by its Indian rules on foreign investment in its domestic arms industry, which have evolved over time. As India developed its arms procurement policy, it introduced offset requirements to leverage foreign technologies in support of its arms industry. However, between 2006 and 2014 the offset rules capped foreign direct investment in Indian arms companies at 26 per cent; this rose to 49 per cent after 2014. In September

2020 the cap was revised again, to 74 per cent. “This higher threshold may raise the interest of major arms companies in partnering with India’s domestic firms or setting up local subsidiaries, it said.

In August, India announced a negative list of

101 defence platforms and weapons whose import will be progressively banned starting December

2020 to boost indigenisation of defence production under Atmanirbhar Bharat initiative. India hopes with this embargo, contracts worth `4 lakh crore will be placed with the domestic industry within the next five to seven years.