Thu, Dec 31, 2015

In Focus

“You can’t change your neighbours”

Is an old widely accepted statement. So you are dependent to some extent on how your neighbours are. A good neighbourhood ensures progress for all while a bad neighbour hampers progress. India’s neighbourhood relations are complicated to say the least. Bounded by Pakistan, China, Bangladesh etc, India has had a history of conflicts with almost all its neighbours.

This article is not about conflicts and the geopolitics involved in them; this is about defence manufacturing. Till 2001, Defence Manufacturing in India was completely a government owned enterprise, the results of which were mixed. India has not exactly been on the forefront of research in defence technology. Fortunately, we had close ties with the Soviet Union and often got defence equipment manufactured under license agreements with them or some other nation. But after collapse of the Soviet Union and the volatility which followed in Russia, India realised that we need to get a serious move on and decided to finally open up the defence to the private sector. Some legislations later, when one has a look at the Make in India webpage for the Indian Defence Sector, one sees some impressive sounding stats. India has an opportunity of about 250 Billion INR in the next 7-8 years. Moreover, India has the third largest army and the 7th largest defence budget in the world as per Stockholm International Peace Research Institute in 2015. There are also promotional schemes for defence manufacturers, like: incentives, tax deductions on R&D, duty remissions on exports. All sounds very good, but it’s a bit more complicated than that as per Indian law. Any procured equipment which is above 3 Billion INR in value has to have a minimum of 30% of its parts sourced locally, that would make up a sizeable number of defence deals. We all understand the importance of a civil military industrial complex; which, in a History Channel documentary, was rated #1 in the category – “top 10 weapons”.

Many military grade equipment ultimately finds civilian utility. The trouble is that our policy makers haven’t always felt this way. Drones can be utilized in agriculture, night vision for observing wildlife and other observations. In the US, enough focus is to put to adapt defence technology for civil use. In India, we have ignored this path for quite a while. Fortunately, the government’s attitude is changing. Albeit with the intent to acquire more technology and generate more jobs, the spill over effects will come.

Truth is that there is no denying that India has tremendous potential. Indian defence PSU’s exported about 768 crores worth of equipment in 13-14. Chinese exports are more than 10 times this figure.

To compete with China, we need to sort out many things. Acquisition of land is one important area so the land acquisition bill is crucial.  Another often overlooked area is that of skilled labour. India needs to first build infrastructure to create a skilled work force which is needed not just for making us a defence exporter but also to make the “Make In India” campaign a success.

By- Shakti Chaturvedi

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