Editorial (Nov-Dec 2015)


Defence industry besides addressing national security concerns, is a subset of “Make in India” - the national manufacturing policy-mosaic. “Make in India” is not just sound economic option but a strategic imperative in promoting India as global hub of manufacturing, particularly in the strategic sectors including defence. As of now the domestic defence industry lacks critical technologies, manufacturing ecosystems for integration of large platforms, supply chain and maintenance and repair logistics.

Although the Govt has taken certain measures in the recent past to boost industrial development, manufacturing and promote viable Indian defence industrial base. The slight improvement in World Bank report on “Ease of Doing Business” indicates the beginning of efforts to improve but a lot more needs to be done. With the measures taken so far, the Indian defence industry is at an inflexion point. A single significant lesson from developed defence industries is the adoption of Hands Off approach by Govts i.e. minimal Govt intervention that too for facilitation, yielded the results. This has not been relevant for defence industry only, but for all sector industrial production.

'Make in India' is dependent upon R&D and production factors, hence to rationalise acquisition procedures is undoubtedly essential to speed up product-delivery & procurement decisions. Manufacturing requires product-technology & engineering, hence need to focus on industry-driven local R&D. Recently, the Prime Minster has emphasised on indigenous technology through frugal innovation, rather than dependent on outside technology will enable us to reduce the defence budget by 50 percent within a decade.

A vibrant competitive defence industrial base would enable utilization and consolidation of existing capabilities in fostering a constructive, long term partnership with global OEM to be part of Global Supply Chain and augment the role of Indian private sector companies to develop capabilities and capacities through JV and partnerships. Need to abandon the past practice of manufacturing part and subsystems in - house in the Govt sector instead build the tierised defence industry structure as System Integrators and Sub-System Developers for in-country capability inclusive of SMEs, with each tier contributing to the Value Chain.

The continuing long terms in-house demand makes a strong business case and the investors are willing to take on the commercial and business risks, by making investment in the sector. The key would be government facilitation of growing interest among Indian and foreign players to ensure that interests are translated into investments. Public-Private Partnership (PPP) is a time tested concept of using the Government's capacity to absorb risk and bringing in private sector investments and dynamism to reach a stated goal. What needs to be done is to implement industry friendly measures and pro-investment steps with a changed mindset.

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