India approves new defense policy to boost local companies

India's cabinet on May 24 approved a long-awaited policy to boost local manufacturing of high-tech defense equipment and cut down reliance on expensive imports.

Under the new Strategic Partnership model, the government will pick Indian companies to tie up with foreign organizations to manufacture fighter jets, armored vehicles, helicopters and submarines locally.

Prime Minister Narendra Modi's government has raised the limit on foreign investment in the defense sector and encouraged tie-ups between foreign and local companies under the "Make in India" manufacturing campaign.

"The new policy will give a substantial boost to domestic manufacturing and service provision, thereby creating employment," a government statement said.     

"Preference in government procurement will be given to local suppliers," the statement added.

India has been investing tens of billions in updating its Soviet-era military hardware to counter long-standing tensions with regional rivals China and Pakistan.

But Modi has said he wants to end India's status as the world's number one defense importer and to have 70 percent of hardware manufactured domestically by the turn of the decade.

Last year, British defense giant BAE Systems said it had chosen India's Mahindra group to build a plant for assembling howitzer artillery guns in the country.

The cabinet also May 24 scrapped the Foreign Investment Promotion Board, a government panel perceived as being bogged down by stifling bureaucracy.

Foreign investments requiring government approval would in future be cleared by individual ministries, the government said.

"Foreign investors will find India more attractive destination and this will result in more inflow...