A Strong Defence Industry to Keep off External Threats

By Editor 09-Oct-2020

India has been a major importer of defence equipment since it became a free country. However, after the Narenda Modi government came to power in 2014, the country is launching programmes for promoting domestic manufacturing in the defence sector and protecting MSMEs. The private industries too are being roped in to achieve self-sufficiency in defence.

Ever since Independence, India has been a major buyer of armaments and defence equipment. In fact, according to a recent study by Stockholm International Peace Research Institute, the country is the world’s third-biggest customer of military equipment after the US and China. Earlier, India depended heavily on the former Soviet Union for its defence needs. Later, it turned to other countries like the US, Israel and European nations to diversify the purchases. Recently, Indian Prime Minister Narendra Modi signed a deal to purchase advanced military equipment worth US Dollars 3 billion with US President Donald Trump.

However, things started changing after Modi came to power in 2014 and India has been launching programmes such as ‘Make in India’ promoting domestic manufacturing in the defence as well as other sectors and protecting MSMEs in the country. For instance, the Defence Production Policy of 2018 has set a goal for India to become one among the top five global producers in aerospace and defence by 2025. The latest among these initiatives is the ‘Atmanirbhar Bharat’ campaign announced by the Prime Minister and draft Defence Production and Export Promotion Policy (DPEPP) 2020. Two defence industrial corridors too are taking shape.

Support for private sector

These programmes aim to boost India’s self-reliance in the key sector of defence, for which the government is also keen to give a fillip to the privateindustries. There is a realization in the country now that private firms should be supported to develop and innovate new defence hardware. Considering that this could be achieved by foreign collaboration, the Indian government has decided to allow 74 per cent foreign direct investment (FDI) in defence production through the automatic route.

In India, FDI is allowed through two routes, automatic and government. While in the former route, companies don’t require approval from the government, in the latter, they need the Centre’s approval.
Speaking at a webinar held as part of the Atmanirbhar Bharat Defence Industry Outreach, the Prime Minister said, “Our goal is to increase production in India, develop new technology in the country, and maximise expansion of private sector in defence production.”

“Many important steps have been taken in this direction,” Modi added. To give a fillip to the domestic industry, the Centre banned the import of 101 military items. The list would soon be extended to more equipment, said the Indian premier.

“We cannot achieve the goal of Atmanirbhar Bharat without giving level playing field to the private sector,” said India’s Defence Minister Rajnath Singh. Regarding the Strategic Procurement (SP) model, an official said that the procurements under the SP policy were open for both the private and the public sector. “The SP was originally meant for the private sector,” he added.

Another official said that any foreign company registered in India, even if it was a subsidiary of a foreign company, would be considered an Indian vendor. “The government’s commitment to self-sufficiency in defence production is not limited to talks or papers,” Modi said. “The government’s efforts are being
directed to ensure increase in defence production, the development of new technology and the assignment of significant roles to private players,” the Prime Minister stressed.

He said that India had immense potential for defence production. “For many years, India has been one of the biggest defence importers. An ecosystem of defence manufacturing has been established over 100 years but unfortunately, this sector did not get the required attention,” he explained.

Another major step to promote domestic industry is the setting up of two defence corridors. “The government is speeding up work on the defence corridors. Stateof-the-art infrastructure is coming up in collaboration with the governments of Uttar Pradesh and Tamil Nadu. An investment target of Rs 20,000 crore has been set in the coming five years for the corridors,” Modi elaborated.

In order to overcome the economic setback created by the coronavirus pandemic, the Prime Minister had announced a Rs 20 lakh-crore financial package, which aimed to create a selfreliant India based on the five crucial pillars of economy, infrastructure e,system, demography and demand.

Boosting exports

Meanwhile, India has set an annual target of US Dollars 5 billion by 2025 for defence exports. “The country has the capability to become a reliable weapons supplier to friendly nations and it will consolidate its position as the net security provider in the Indian Ocean region,” said the Prime Minister.

To achieve this goal, apart from allowing 74 per cent FDI in defence through the automatic route, the Central government is engaged in the process of corporatisation of the Ordnance Factory Board (OFB). According to Rajnath Singh, the corporatisation of the OFB would be completed within a year. “We have earmarked a portion of our defence budget for procurement only from the domestic industry. For the current year, the amount will be Rs 52,000 crore,” he said.

Moreover, for developing new indigenous technologies, the government has launched initiatives to ensure a simplified licensing field, level playing field and simplifying exports. At the same time, Chief of the Defence Staff (CDS) Gen. Bipin Rawat said that India’s efforts to promote defence exports have started to yield results. “We are receiving requests from various countries. Our radars as well as artillery support systems are much in demand,” he said.

The government has also formulated a draft Defence Production and Export Promotion Policy (DPEPP) 2020 with the aim of achieving a manufacturing turnover of US Dollars 25 billion, which is equivalent to Rs 1,75,000 crore, including exports of US Dollars 5 billion in aerospace and defence goods and services by 2025. The draft DPEPP has also set a target to double the procurement from domestic industry within the overall defence procurement from the current Rs 70,000 crore to Rs 1,40,000 crore by 2025.

“The government has undertaken reforms in the toughest sectors like Intellectual Property (IP), taxation, insolvency and bankruptcy and even in space and atomic energy. For foreign Original Equipment Manufacturers also, producing in India will be the best option,” said the Prime Minister.

Regarding the ban imports of 101 defence items, Gen Rawat said that by early 2021 a second list with more technologically advanced equipment would be released. “The number of items on the next list will be even more than the present one and the lists are also will be increased,” he said.

The CDS also said that if the aerospace industry can become self-sufficient, including aerospace in the negative list will be a big achievement.

Israel model

Several defence analysts have suggested that Israel’s defence policy was ideal to follow. Israel has developed high technology products for its self-protection and after meeting domestic requirements, launched programmes to commercialize the items. This policy has not only enabled the country to earn foreign exchange but also improved its position among the powerful nations of the world.

Similarly, a strong defence base in the country would enable India too to issue a warning to its enemies, especially in the neighbourhood, and prevent interference from them.