India is one of the largest importers of defence goods with the country importing nearly 70 per cent of its needs. To attract foreign companies to set up their plants in India, the government last year hiked foreign direct investment in the defence sector to 49 per cent from 26 per cent.
Global consulting firm Protiviti believes that the government would look at increasing FDI to 100 per cent in defence to encourage foreign participation, but it would not happen in the Budget.
What Finance Minister Arun Jaitley is expected to do is to offer some incentives to Indian firms to encourage domestic manufacturing, it said.
"What the government is looking at is the "Make in India" drive and defence manufacturing is one of the areas which they are looking as one of the important sectors where the manufacturing percentage of the GDP could increase," Nidhi Goyal, managing director, Protiviti, India said. (Watch)
There has been a spike in the interest in Indian companies to participate in defence manufacturing, the global consultancy said.
"It is not just the foreign companies who are looking to participate in the defence sector in India but it's the Indian companies which are becoming more interested and looking for more projects to come to them directly from the government and that's where the interest is."
South Asia's biggest air show in Bengaluru that kicked off last week has seen more Indian companies participate this time, Protiviti said.
As far as foreign companies are concerned, Protiviti says, they are still looking for an increase from the 49 per cent FDI limit as it does not give them enough control over the companies.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
