The Author is Former Director General of Information Systems and A Special Forces Veteran, Indian Army

The rules for Foreign Direct Investment (FDI) in the defence sector in India were eased from maximum 74 per cent to 100 per cent in 2015. However, no foreign firm was approved for such a venture until now. In 2016, the French firm DCNS was the first foreign company to seek approval for 100 per cent FDI to set up an Indian subsidiary to develop advanced systems that would give submarines more underwater endurance. It had sought clearance to invest over Rupees 100 crore in DCNS India Ltd to develop high-end critical defence technologies. However, DCNS was not granted the requisite permission.

The 100 per cent FDI approval to Saab FFV India, signals a paradigm shift in India's defence manufacturing sector

In 2020, the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry issued a press note dated September 17 to notify 100 per cent FDI. This was for the Defence Industry, subject to Industrial license under the Industries (Development & Regulation) Act, 1951 and Manufacturing of small arms and ammunition under the Arms Act, 1959. FDI in the defence sector is also subject to scrutiny on grounds of national security and the government reserves the right to review any foreign investment in the defence sector that affects or may affect national security.

Recent media reports of November 4, 2023 have revealed that the in October 2023 the Government cleared the first 100 per cent FDI in the defence sector, by according permission to Swiss firm SAAB for investing under 500 crore to set up a new facility that will manufacture the Carl-Gustaf M4 system.

The company 'Saab FFV India' was under registration in September 2022 when SAAB announced it would set up this new firm with production to start in 2024 to make the state-of-the-art weapon in India and assured to fully meet the requirements of "Make in India". The statement released by SAAB said, "Saab FFV India will deploy complex technologies including the latest sighting technology and apply advanced manufacturing techniques like carbon fibre winding for the Carl-Gustaf system including the latest M4 weapon."

The Saab FFV India plant in Haryana promises to deploy advanced manufacturing techniques, including carbon fiber winding, to produce the state-of-the-art Carl-Gustaf M4 system

Görgen Johansson, head of Saab's business area Dynamics was quoted in the press release, who said, "It is a natural step to set up a production facility for Carl-Gustaf M4 in India given the long and close association we have with the Indian Army as one of the foremost users of the system. We are glad to be able to contribute to the Government of India's goals of developing a world class defence industry and proud to offer the Indian Armed Forces our Carl-Gustaf M4 made in India. Saab has partnered with Indian companies to make parts or components for Saab's products on the global market. Saab said it will continue its partnership with Munitions India Limited (MIL) and Advanced Weapons and Equipment India Limited (AWEIL) to manufacture the Carl-Gustaf weapon and its ammunition."

Media reports of November 4, 2023 have quoted Mats Palmberg, Chairman and Managing Director, Saab India as saying, "We are proud to be the first global defence company to be approved by the Indian government for 100 per cent foreign direct investment for our new Carl-Gustaf manufacturing facility in India. This is another step in Saab's commitment to 'Make in India,' and we look forward to continuing our collaboration with our Indian partners and to supporting the Indian armed forces with production of Carl-Gustaf in India."

The Indian Infantry has been using Saab's Carl-Gustaf since the 1970's. This shoulder fired rocket launcher being portable, man-pack and with multiple options of munitions has performed very well in operations, wars as well as in counter-insurgency and counter-terrorist operations. Ironically, the record of our Defence Research and Development Organisation (DRDO) has been very poor in development and production of small arms and such weapon systems. Therefore, the establishment of a Carl-Gustaf M4 system manufacturing plant in India makes eminent sense.

The Saab FFV India plant is poised to become a global center for the export of the widely-used Carl-Gustaf M4 rocket launchers, potentially transforming India into a key player in the international defence market

The Saab FFV India plant for manufacturing the Carl-Gustaf M4 system is being set up in Haryana. Being 100 per cent FDI, it should not face the delay as in the Indo-Russian Rifles Private Limited (IRRPL) manufacturing the AK-203 assault rifles. We need to get over the tendency of slowing down with the unending red-tape after the excitement and fanfare of the inauguration of production facilities gets over.

How much is the transfer of technology (ToT) by Saab FFV India in the instant case is not known but the potential of export is tremendous, this being the first foreign venture for this weapon system. The Carl-Gustaf M4 rocket launcher is reportedly being used by at least 45 armies around the world. SAAB has announced that it has received an order of 300 systems from Japan Self-Defense Forces (JGSDF) and deliveries will take place in 2025.

The Saab FFV India plant in Haryana, therefore, can become a global hub for export of the Carl-Gustaf M4 rocket launchers. This should also lead to opening up for more foreign firms setting up 100 per cent FDI defence ventures in India, making India a leading defence exporter.