New Delhi, April 6 (KNN) A joint study, 'Self-reliance in defence production: The unfinished agenda,' by ASSOCHAM-PwC states that long-term & large investment, cutting-edge technology and low economies of scale are indispensable to augment defence production in India. And for this to happen the government, it says, needs to take some important steps in this direction.

Increasing the foreign direct investment (FDI) cap to 74 per cent or to even 100 per cent may help in setting up manufacturing facilities, bring in advanced technologies and generating high skilled employment by attracting investment and increasing the inflow of capital. This would also help setting up of units of original equipment manufacturers (OEMs) and their suppliers with transfer of technology.

The study also stressed the support by the government as essential to building a private industrial base with proactive policies and in funding research and development.

Some other steps that the study suggests are the establishment of a low-interest regime to bring down capital costs and focusing, analysing the disadvantages of exchange rate fluctuations, providing stability and assurance in policy and orders and encouraging exports to achieve economies of scale and become globally competitive.

It notes that with large business houses making their entry in the defence sector and micro, small and medium enterprises (MSMEs) playing a vital role within the value chain, there is no dearth of investment enthusiasm within the private sector. But the indecision related to procurement in the defence sector, lengthy periods of gestation, absence of an assured market tilts the risk-return profile. (KNN/SS)