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30 July 2020, Gateway House

A Defence Industrial Agenda for India

The delivery of five Rafale fighter jets this week demonstrates the continued upgrading of India’s military capabilities. A key part of this process has been the building of a domestic defence-industrial base by promoting participation of the private sector. Bringing certainty to defence procurement, monitoring emerging technologies and joining hands with like-minded countries, will play a critical role in taking this forward.

Fellow, International Security Studies Programme

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India has upgraded its military capabilities over the past two decades, mostly through imports as domestic manufacturing of advanced equipment has consistently fallen short of satisfying the requirements of the armed forces. Defence manufacturing in India remains restricted and burdened by excess regulation. Efforts to promote private sector participation have yielded limited results, mainly due to the opposition from defence public sector units, which have enjoyed a monopoly in a monopsony market.

Since 2014, the government has made a concerted effort to enlist the private sector and start-ups to boost country’s defence-industrial capabilities. The mechanisms for their participation are the Strategic Partnership model and the Innovations for Defence Excellence programme. Progress has been slow because the private sector has been waiting for a major weapons contract, without which it would be difficult for them to sustain investments in the requisite infrastructure. Still, private companies have been tying up with U.S. and European aerospace companies for the manufacture and export of sub-systems, giving them an active position in the global supply chain.

Defense Industrial Agenda Cover_Final_2020

 

To create a robust defence-industrial base, the government will have to step up the pace of de-regulation and pragmatic planning for the immediate, medium and long term.

Immediate

a) The Strategic Partnership model has to be re-oriented to encourage and enable partnerships between the DPSU and the Indian private sector. Such partnerships ought to be prioritised in defence procurement, or, as an initial experiment, be awarded contracts for manufacturing equipment from the already marked categories under the Strategic Partnership model.

Medium

a) India’s future lies in the Indo-Pacific. A key enabler for this is the Indian Navy, which has undergone a significant expansion. Yet, in critical platforms, the Navy still lags. The Navy needs greater budgetary resources to achieve the necessary strategic capacity – 22%-23% of the annual defence budget, closer to the share of the Air Force.

b) India can initiate flagship domestic programmes based on existing competencies in information and digital technologies. This will help to integrate the commercial and manufacturing dimensions of production with R&D efforts and expedite the commercialisation of these technologies. It also offers opportunities for Indian IT majors, which have so far played a limited role in military modernisation.

Long-term

a) The Indian Navy is the most indigenised of the three services, yet the capacity for shipbuilding is primarily concentrated in the DPSU shipyards, rather than the private sector. This is not encouraging for the private sector companies, which are hoping to get a larger share of defence contracts. To provide capacity and resources, the government can explore creating the global model of a Common User Facility, which can potentially have facilities such as fabrication, assembly, commissioning, maintenance, and repair activities.

b) India has initiated some technology co-development and co-production projects with the U.S., Israel and Japan. This cooperation needs to evolve to include additive manufacturing. The scope this technology offers for customisation can be advantageous for the Indian defence industry in capacity-building.

You can download the PDF version of this paper here.

Sameer Patil is Fellow, International Security Studies Programme, Gateway House.

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