Whether to allow more Foreign Direct Investment or FDI in defence has created a rift between two senior members of the cabinet. Defence Minister AK Antony has objected stridently to Commerce Minister Anand Sharma's proposal to increase foreign investment in the defence sector from the current limit of 26% to 49%.In a note to Mr Sharma, the Defence Minister has argued India "cannot afford to be dependent on foreign companies and vulnerable to policies of their countries of origin". He also says "Allowing foreign companies to set up manufacturing/ assembly facilities here would be a retrograde step as it will stymie the growth of indigenous design and development."The Commerce Minister had written to Mr Antony in May, asking for the limit on foreign investment to be raised to 79 per cent; he revised this to 49 per cent in a subsequent note.The Defence Ministry has been burnt recently by allegations of mega-corruption in a deal -now suspended - to buy 12 Agusta Westland helicopters from an Italian manufacturer for VVIPs. Mr Antony responded by drastically changing policies for buying equipment from foreign companies. The private sector in India, he has said, will be incentivized to develop and acquire critical technology to cater to the requirements of the Indian Armed forces.The PM and Finance Minister have repeatedly said that they plan to introduce more reforms to boost foreign investor confidence and resuscitate the sluggish economy.Last month, Mr Chidambaram said, "The government is looking at FDI (foreign direct investment) caps to see if they are indeed serving the purpose. Otherwise the caps could be revisited."

In September, the Prime Minister's decision to allow foreign super-chains to enter India's vast retail sector forced his government into a minority; Mamata Banerjee withdrew her Trinamool Congress from the ruling coalition in protest against what she described as "an anti-people policy."