"The Indian defense industry is expected to be a significant source for outsourcing for the multinational companies by way of discharge of their offset obligations," India's junior defense minister, Rao Indrajeet, told the Indian Parliament Monday.

He said in terms of the procedure for implementing offset provision notified in defense procurement procedure-2006, 30 percent of the indicative cost of capital acquisitions categorized as buy global and 30 percent of the foreign exchange component in buy and make category acquisitions will be minimum required offset.

The minister informed lawmakers the offset obligations shall discharged directly by any combination of the following methods: direct purchase of executing orders for, defense products and components manufactured by, or services provided by Indian defense industries, direct foreign investment in Indian defense industries for industrial infrastructure for services, co-development, joint ventures and co-production of defense products and foreign direct investment in Indian organizations engaged in research and defense research and development as certified by defense offset facilitation agency.

"While defense equipment manufacturers in the public and private sector can, with prior approval of the government, set up joint ventures subject to a cap of 26 percent on FDI in defense sector, ordinance factories, being government department can have similar arrangements in the form of memorandum of understanding with foreign companies for co-development and co-production of defense items," the minister said.