Lowering Defence Imports in India : Evaluating Domestic Manufacturing Capabilities

Make in India in Defence Space: Stimulating Core in House Manufacturing Capabilities

Time has come for India to leave the average behind and take a leap to go for global leadership in manufacturing. For Indian manufacturing to soar high and to reach at the top nosh level as per the global benchmarks , “ Make in India” (MII) has given enough fillip to convert this into a reality. Like other manufacturing segments , Indian defence facet being no different is projected to be one of the highly investment seeking sector in the MII campaign. India has been rapidly enhancing its spending on defence year on year. Presently, India stands as the third largest defence spender in the world after US and China. Equipment spending  by  Ministry of Defence has increased 15-20% over the last five years and is projected grow at a much escalated speed in near future.

Although, India is among the top ten military spenders in the world. However, unlike other geographies  which have  large defence industries to support their domestic needs , Indian requirements are primarily met by government players into the domain and imports. With importing nearly USD 5.5 Billion worth of military hardware, India has emerged as the largest arms importer in the globe accounting nearly 15% of such imports internationally. Hence self-reliance to sustain the needs of Indian defence sector is of vital importance for strategic and economic reasons. Since the government has been assiduously working upon building the  defence manufacturing capabilities  over the years.  But to look beyond the customary curve , “Make in India” has triggered the  positive sentiments for making India to stand at par with its global counterparts with respect to its in house defence manufacturing competencies.

MII has provided a level playing field not only to the domestic public sector players and international giants to collaborate together but has  opened opportunity gates for the domestic  private players as well. This will not only significantly cut down the import burden but will also increase the  presence of domestic players in the Indian defence manufacturing market.  At present,  about 50% of the defence manufacturing in India is dominated by the international players (via imports). With enhancing the participation of domestic players in the  defence space, the share of imports is projected to drip down by 20-25% in 4-5 years down the line.

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Strengthening the Domestic Manufacturing Base: Cutting down the Imports

For India to build a strong defence manufacturing base  in future , collaborating with mature as well as developing markets is the need of the hour. Although countries such France, Russia ,UK etc have been aiding India for its defence requirements since long. About 50% of the military imports of India were cumulatively driven by France  & Russia over the past many years. But it’s the time for India to take a step beyond the comfort zone by zeroing down the imports  and  applying manufacturing expertise pioneered in these nations .Historically, India has  always favoured public sector over the private players in the defence production space. But, the growing demand of military equipments in the country coupled with the government’s vision to make India a leader in global manufacturing is likely to change the old track and provide  new pathways for private players to enter the defence manufacturing space. Not only the domestic private fellows but the international origin firms with expertise in catering the defence requirements have too found a breeding ground for expanding their business  within the Indian periphery. Global giants like Dassault , Rafael , Airbus are projected to forge JVs with the Indian players in order to set up strong manufacturing capabilities and R&D bases for India’s defence sector. It is noteworthy that investments to the tune of USD 1 Trillion or may be above are likely to be made via JV route. Not only the major domestic players but the SMEs too are projected to be the highest beneficiaries  of increased defence production in the country. Huge supply chains , complying with world class  standards will come up around the manufacturing facilities and would help the Indian SMEs to enter the global supply chain of manufacturers.

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*The views expressed in this article are solely those of enincon perspectives and do not necessarily represent those of Enincon LLP.

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