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Sweden-based defence company Saab has received clearance from India’s government to build a new missile facility in the country to produce the latest generation of the Carl-Gustaf M4 rockets system.

The investment will cost INR5bn ($60m) and will be India’s first foreign direct investment (FDI) project in the defence sector entirely financed and developed by a foreign company, according to The Economic Times. It added that the shoulder-fired rockets will be produced by Saab’s newly formed subsidiary in India, Saab FFV India.

“We are proud to be the first global defence company to be approved by the Indian government for 100% foreign direct investment for our new Carl-Gustaf manufacturing facility in India,” Mats Palmberg, chairman and managing director at Saab India, is quoted as saying. “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 the production of Carl-Gustaf in India.”

FDI in India’s aerospace and defence sectors has proven a contentious point for New Delhi, with the country struggling to balance its relationships with Russia and the West through its non-alignment strategy. Russia continues to be India’s largest provider of arms, although a report published by the Stockholm International Peace Research Institute (SIPRI) in March 2023 shows that the import of Western weapons to India is on the rise. According to SIPRI, 30% of France’s arms exports between 2018 and 2022 went to India.

The Indian government currently allows up to 74% FDI in the defence sector under the automatic route.