In a significant development, Sweden’s Saab has achieved a milestone by becoming the first foreign company to secure 100% Foreign Direct Investment (FDI) approval for defense projects in India. The company is set to establish a new facility in the country dedicated to the manufacturing of shoulder-fired rockets.

The Economic Times reports that the ₹500 crore FDI proposal was granted clearance last month, marking a groundbreaking move in India’s defense sector. While the authenticity of the report could not be independently verified by Mint, the implications of this decision are noteworthy.

Despite the Indian government permitting 74% FDI in the defense sector through the automatic route, securing clearance beyond this threshold has historically been a case-by-case process. Although some relaxation occurred in 2015, no foreign firm had previously received permission for 100% FDI in defense.

What Saab plans to do
According to reports, Saab FFV India has been officially registered and will focus on manufacturing the latest generation of the Carl-Gustaf M4 system. This marks the first time that Saab will produce the Carl-Gustaf M4 outside of Sweden. The new facility is expected to be established in Haryana.

The Carl-Gustaf M4 system includes shoulder-fired rockets extensively used by the Indian armed forces. These rockets are employed by various countries, including the US and European nations, to neutralize fortified enemy positions, armor, and personnel.

Implications for foreign businesses investing in Indian defense projects
Saab’s achievement sets a precedent for other foreign businesses eyeing investment in India’s defense projects. With the Indian government’s recent efforts to liberalize FDI in the sector, the approval granted to Saab signals a positive shift. This move is particularly significant as it reflects the government’s willingness to facilitate access to modern technology by allowing FDI up to 100% through the government route.

As of the April-September period in FY 2023, India has received $3.21 million in FDI in the defense industries. This underscores a notable increase compared to previous years, emphasizing the growing interest and confidence of foreign investors in India’s defense sector.

It’s worth noting that Saab’s initiative aligns with the government’s broader strategy to enhance indigenous defense production and technology capabilities. The successful implementation of this 100% FDI approval could pave the way for more collaborations, technology transfers, and investments in the Indian defense sector.

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Image: Breaking Defense