With its weaponry facing rapid obsoletion, the government on Monday proposed to raise FDI in defence production to 74 per cent, saying it would help ensure technology transfer and funds to effectively replace imports, estimated at over USD 8 billion.
Mooting a discussion for raising FDI from 26 per cent in defence production to the same level as telecom sector, the Industry Ministry also sought to allay security concerns and impact on domestic players, saying effective checks could be put to tackle any "suspect" company.
Leading industry chamber CII, which had earlier asked the government to limit FDI to 49 per cent only, declined comments while no reaction could be obtained from FICCI.
Another industry chamber Assocham said it is a strategic and sensitive sector and opening up FDI from 26 per cent to 74 per cent straightaway "will not be a prudent step".
Increasing FDI cap from 26 per cent to 49 per cent as advocated by some industry associations "will not really help us in getting the best technology partners to invest in India... (by this) we may be accused by posterity of doing too little and too late," the discussion paper said.
"The established players in the defence industry should be encouraged to set up manufacturing facilities... in India with FDI up to 74 per cent," it added.