Emergence of India as Defence Manufacturing Hub

The Backdrop

The first seven months of 2020 have embroiled the entire globe in an unforeseen turmoil with the equations changing in the geo-political environment resulting in likely emergence of a new world order and renewed national alliances, especially with an anti-China sentiment. This has not only has changed the outlook towards lifestyle but also the shifting of business and industrial units. The turbulence due to Sino-US tension duly fuelled by the COVID-19 and bullying of countries by China has seen the emergence of India as a major epicentre of power and influence in the world. While the economy of countries reels under the effect of COVID-19, the initiatives by Modi government like “Digital India”, “Make in India”, and “Aatmnirbhar Bharat” etc have resulted in making India a safe and futuristic manufacturing hub.

The Defence Sector Scenario

The western countries have always projected India as a down trodden country with little scope for progress. A few years back, India was hardly considered as a producer/ manufacturer in defence sector and never considered a serious player in the geo-political scenario. The legacy in post-British era only constituted of few Ordnance factories with no participation in research and development. Although, in 1958, DRDO was constituted, however, the contribution of DRDO remained lustreless till the “Missile Man”, Hon’ble Dr APJ Abul Kalam brought the Indian Missile programme to a standing.

During and after 1980’s, the defence sector manufacturing has taken a surge which is very evident by the following indigenous projects, which not only showcases the present capacity and capability of the Indian manufacturers but also is an indicator that the Indian defence sector is now mature enough to emerge as a defence manufacturing hub and a major exporter. While the indigenous weapons can be exported to third world countries, the manufacturing hub can offer services to advanced countries, thereby promoting economy, technology and skills.

• Strong focus on self-reliance, with all naval vessels including submarines on order, being constructed in India and a drop in expenditure on capital procurement from foreign vendors from INR 35,082 crores in 2013-14 to INR 22,422 crores in 2015-16.

• DRDO has reached advanced stages of completion in key projects such as the Long Range Surface to Air Missile (LRSAM), the Astra Beyond Visual Range Missile (BVRM), Airborne Early Warning and Control System (AEW&CS) and the Rustom-II Unmanned Ariel Vehicle.

• The indigenously developed warships INS Kochi and INS Kolkata have been commissioned with the INS Kalvari Attack Submarine undergone sea-trials.
• Since 2015, major Aerospace & Defence companies such as, Airbus and Mahindra Defence Systems, Boeing with Tata Advanced Systems Lockheed Martin, and Safran already have a footprint in the Indian market, to manufacture military helicopters, the fuselage of Apache helicopters.
• India is also in the process of jointly developing a fifth-generation stealth combat aircraft with Russia under the PAK-FA program
• Sale of first indigenously designed and built multi-role offshore patrol vessel (OPV) named Barracuda, to Mauritius and sale of indigenously developed lightweight torpedoes worth US$37.9 million to Myanmar.
• Ordnance Factory Board (OFB) secured its biggest export order from UAE for the supply of 40,000 numbers of 155 mm artillery shells for Rs 322 crore and supply another 50,000 artillery shells
• Reliance Defence has set up a  joint venture, Dassault Reliance Aviation Limited (DRAL), with Dassault  will see an investment capped at$100 million (Rs 850 crore) for setting up a plant to manufacture parts for Falcon executive jets,
• The top 10 indigenous production includes DHRUV utility helicopter, DHANUSH howitzer, NAG anti-tank missile, Pinaka Multi Barrel Rocket Launcher, Akash Missile System, Arjun MBT, RISAT (Radar Imaging Satellite), LCA Tejas, Agni 5, Prithvi Air Defence (Anti-Ballistic Missile).
  
  

Steps taken by Govt to Boost Defence Exports

India has recently allowed the private sector to enter the defence production. India’s defence exports were INR 4,682 crore (US$0.66 billion) in 2017–2018 and INR10,500 crore (US$1.47 billion) in 2018–2019 and are expected to increase exponentially in next few years due to aggressive measures taken up by the govt since 2014. Defence Production Policy of 2018 (DPP-2018) has a goal of being among the top 5 global producers of the aerospace and defence manufacturing with an annual export target of US$5 billion by 2025. Various steps taken by the govt in this regard are:-

• The Make in India in Defence scheme has resulted in substantial growth of defence export 700% in just two years, from $213 million in FY 2016-17 to $1.5 billion in FY 2018-19. Encouraged by this, the government set a target of achieving defence export worth $4.87 billion (Rs 35,000 crore) by 2021.
• Efforts to get FDI in defence sector by first raising the cap from 26% to 49% through automatic route and 100% through MoD’s approval, whereby the investing foreign entity can have ownership up to 100% in the defence manufacturing.
• Introduction of various categories of defence projects such as Buy Indian-IDDM(Indian Designed, Developed and Manufactured), Buy Indian, Buy Global, Buy & Make(Indian), Buy &Make is likely to boost the PSUs as well as private industry
• Liberalised and transparent policy for granting Industrial licences
• Funding of private sector design and development projects with a special focus on the Medium and Small Manufacturing Enterprises (MSME) Sector
• Streamlining of defence exports resulting in a significant increase of the same.
• Defence cooperation agreements and memorandums with 20 countries
• Strengthening of strategic partnerships with USA, Russia and EU nations to facilitate the transfer of technology
• Govt of India banned the import of 101 defence items to boost indigenous production in consonance with Modi govt’s Atmanirbhar Bharat.

The Way Ahead

While the govt has taken significant and encouraging steps to promote defence manufacturing and exports, the bureaucracy and industries need to gear up to meet the challenge. In order to compete with Tier 1 manufacturers, it is recommended that the following steps be taken at various levels

• Bureaucracy   In the past, companies have been known to shy away from setting up manufacturing plants in India due to complex and cumbersome procedures and inordinate delays. The bureaucracy should design, plan and implement a single window, online, user-friendly procedures for grant of licences for setting up plants, exports, imports, attracting FDI. In addition, a corruption-free environment will be a major attraction and added environment.
• Industries and Directorate General of Quality Assurance (DGQA) The products need to meet various quality standards in order to be able to compete with foreign manufacturers. In this regard, while the industries need to undertake R&D as well as upgrade the technology base and skills of workers, the DGQA is expected to whole-heartedly support them as regards testing and certification of the products, assemblies, sub-assemblies and components. In view of this, the following issues will be significant
  • Designing policies and procedures for quality assurance and testing. These will have to be customised for each product including COTS/ MOTS items.
  • Laying down and implementing a strict time plan. For this purpose, additional testing facilities and staff may be required in the country.
  • The Directorate of Standardisation needs to speed up the process of correlating and allocating cat part numbers to avoid unnecessary delays
• Steps to reduce brain drain from the country and promote R&D, think tanks for defence sector. This needs to be a deliberate attempt at the level of industries, govt, prestigious institutes as well as organisations.