India Defense Ministry Targets Local Manufacturers

Will the new Defense Production Policy make India a major defense manufacturing hub?

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In a move that is expected to give a big fillip to the manufacturing sector, the Indian government has brought out its first-ever Defense Production Policy, which states that in all future defense purchases, preference will be given to indigenously developed equipment.

Self-reliance in manufacturing used to be the professed goal of all Indian planning, and defense was no different. “For the first time, we have come out with a standalone production policy, as self-reliance in defense has been a long-standing demand of the country,” Defense Minister A. K. Antony said in a statement.

“Preference will be given to indigenous design, development and manufacture of defense equipment,” states the new policy, which aims to achieve at least 50 percent indigenization in defense purchases over the next decade. The new policy has for the first time specified that all proposals for purchases will be screened to determine whether they can be procured from the Indian market.

Failed decade

India, which wields the world’s 10th-largest military budget, at $32 billion this year, has failed in a decade-long campaign to reduce its dependence on foreign suppliers. The country has been one of the largest importers of military hardware. India procures nearly 70 percent of its requirements through imports, and according to industry estimates, it will spend up to $50 billion on defense procurement over the next five years.

The policy also aspires to create for private industries—particularly small and medium enterprises (SMEs)—conditions conducive to their playing an active role in the endeavor, while looking for to broaden the defense research-and-development base.

“The policy would be instrumental in harnessing the combined skills of public and private sector, with the aim of achieving self-sufficiency in defense production. This could herald an era of unprecedented defense industrial growth in India,” said Salil Bhandari, President, PHD Chamber,  in a press release issued by the Chamber.

There are immense opportunities for growth within the domestic and global defense and aerospace industries, and this policy would help India to enhance its dependence for defense products on indigenous sources and reduce its heavy dependence on imports, Bhandari said.

The SME sector, comprising 28 million entrepreneurs in India, will get a shot in the arm with the implementation of the new defense production policy. “The mandate to enhance the potential of SMEs in indigenization of defense production, as well as to broaden the defense R&D base of the country, is a much-awaited announcement, as worldwide, global OEMs (original equipment manufacturers) work in close coordination with SMEs,” Salil said. Small and medium enterprises offer the advantage of innovative capabilities in niche manufacturing, greater flexibility, lower overhead costs and the ability to learn and absorb new technologies.

Gearing up

Nearly 2,000 entrepreneurs in the country are engaged in manufacturing of equipment needed in the defense sector. The Department of Defense and the Federation of Indian Micro, Small & Medium Enterprises (FISME) has initiated the process of identification for intervention to enact the policy for the small and medium enterprises.

The Confederation of Indian Industries (CII) has issued a statement saying: “We appreciate the policy acknowledging that private sector would have to play a larger role in defense production. We anticipate that an implementation roadmap with benchmarks would be announced soon.”

Observers say that a clearly focused policy can imminently meet the twofold objectives of ensuring an around-the-clock flow of defense equipment, at the same time deepening domestic manufacturing capability.

About the author

Uday Lal Pai, udaylalpai@gmail.com, is a freelance journalist based in India.

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