Highlight on the need for indigenization of defense sector industries in India ?

Question – Highlight on the need for indigenization of defense sector industries in India. Also, analyze the challenges and opportunities inherent in promoting indigenization of defense production. 4 March 2022

AnswerThe released report by the SIPRI “Trends in International Arms Transfers-2020” depicts that, India emerged as the second-largest importer of arms transferred between 2016-20, with a share of 9.5% of global arms imports. Even so, its imports fell 33% from that between 2011-2015.

The Indigenisation of Indian Defence Sector can be understood as the capability to develop and produce defence equipment within the country for the purpose of achieving self-reliance and reducing the burden of imports. The Indian Defence Sector aims to design, develop and lead the production of state-of-the-art sensors, weapon systems, platforms and allied equipment for the Indian Defence Services.

Late President of India, Dr. Abdul Kalam propagated the requirement of private entrepreneurs to work in defence manufacturing, alongside the 9 Indian Military Industry PSUs such as HAL, BEL, BDL, BEML, MIDHANI, MDL, GRSE, and 41 Ordnance Factories – to reduce the heavy reliance of Indian defence sector on imports and instead focus primarily on research and development (R&D), defence production and procurement, to promote the development of defence and dual-use systems, subsystems, components, or technologies, for a product that is Indian Designed, Developed and Manufactured (IDDM). 

The primary benefits of indigenisation of defence industries can be succinctly defined as a much-needed reduction in the fiscal deficit, security against its porous borders and hostile neighbours, generation of employment and ignition of the fire of nationalism and patriotism with the strong sense of integrity and sovereignty amongst the Indian Forces.

Need for Indigenization:

  • Supplier pressure – Refusal of parts due to political reasons, high cost of parts, delays and lack of transparency in technology transfer, etc.
  • Allegations of non-transparency and corruption in defense deals, e.g., the Augusta Westland chopper scam.
  • Through indigenization. The outflow of precious foreign exchange will decrease.
  • By promoting R&D and cutting edge technology, it will also strengthen the respective manufacturing and services sector.

India’s path forward:

From creating a new “Buy (Global — Manufacture in India)” procurement category to implementing a negative import list of 101 weapons systems and increasing the Foreign Direct Investment (FDI) limit in defence production to 74% through the automatic route, India’s defence establishment has introduced several measures to achieve self-reliance in defence manufacturing. Concurrently, India’s export base has widened as well.

More recently, India has reserved ₹70,221 crores, around 63% of the capital outlay for FY 2021-2022, to procure defence systems indigenously produced. A second negative import list is reportedly in the making as well, and may feature systems like tanks and aircraft. Export of systems such as the BrahMos supersonic cruise missile, Arjun Mk-1A tank, Tejas light combat aircraft (LCA) Mk-1A, Astra beyond-visual-range missile, and Pinaka systems is also being pushed.

Opportunities that will be created by indigenisation of defence production in India are as follows:

  • The government estimates that a 20-25% reduction in defense imports will create additional 1-1.2 lakh highly skilled jobs.
  • Opportunities will arise in engineering services, supply chain sourcing and allied maintenance and repair and overhaul related opportunities.
  • The synergy between defense forces, private players and MSMEs will save time, money and effort.
  • Spin-off on other areas in terms of advance materials and technology etc.

Threats from China and Pakistan leave India with no other option but to augment its defense capabilities to secure its national security interests. Therefore, for India to continue to keep its defense imports in check, it must invest in domestic capacity building, innovation, and joint collaborations. At the same time, atmanirbharta should not become a euphemism for protectionism, compelling the Indian armed forces to choose from indigenous alternatives regardless of quality and capability.

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