When NDA was in power in 2001, the Finance Minister Yashwant Sinha and PM Vajpayee realized the great need for tapping domestic private potential to develop defense parts. So far from 1947 till 2000, Defense was purely a Public Sector Unit (PSU) and the problem was improper access to emerging technology and huge imports of weapons and equipments from Russia and other countries. When machinery came from Israel, it helped India win the Kargil war else we would have lost. Even before war had started, Vajpayee had continued discussions with Israel to get more weapons.
Hence in 2001, 100% private participation by domestic companies(like L&T) was allowed to manufacture parts of the defense equipments like radar, parts of helicopters etc. This helped better quality and high efficiency low cost materials to be infused into defense sector. In fact, Dhruv, Tejas have become very famous and countries have signed billions of dollars since then to buy them. At the same time FDI was capped to 26%. This helped foreign companies to strike deals with India.
Hence in 2001, 100% private participation by domestic companies(like L&T) was allowed to manufacture parts of the defense equipments like radar, parts of helicopters etc. This helped better quality and high efficiency low cost materials to be infused into defense sector. In fact, Dhruv, Tejas have become very famous and countries have signed billions of dollars since then to buy them. At the same time FDI was capped to 26%. This helped foreign companies to strike deals with India.
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