← All questionsGS3 · 2014 · Indian Economy ·Defence FDI Liberalisation
QUESTION 9
GS3
12.5 marks

Foreign Direct Investment (FDI) in the defence sector is now set to be liberalized. What influence is this expected to have on Indian defence and economy in the short and long run?

WRITE IN
9 min
200 words

What the examiner wants

Assess the short- and long-term influence of liberalising FDI in defence on security and economy.

DiscussExplain the different sides of the issue, use evidence, and finish with a balanced view.

Demand-wise check

  1. 1Short-run: inflow of capital, joint ventures, reduced import dependence slowly≈35 words
  2. 2Long-run: technology transfer, indigenous production, exports, jobs, MSME supply chains≈35 words
  3. 3Risks: foreign control, security, technology denial≈35 words
  4. 4Policy evolution: limits raised over time; Positive Indigenisation Lists≈35 words

Open in about 30 words and close in about 30.

Answer plan

Policy changeShort-term impactLong-term impactRisksConclusion

Where marks usually go

  • Not separating short and long run
  • No data on defence exports

Draw this

  • Timeline of FDI cap changes

Value addition

  • PolicyDefence FDI cap was raised from 26% to 49% in 2014 and to 74% automatic in 2020, 100% via government route.DPIIT
  • DataDefence exports reached Rs 21,083 crore in 2023-24.Ministry of Defence

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