Business Today

Defence procurement policy holds key to Make in India, Foreign Trade Policy

In the current scenario, India's regulations are so prohibitive that even the government is unable to purchase defence equipment made in India.

twitter-logo Shweta Punj        Last Updated: April 14, 2015  | 10:11 IST
PM Narendra Modi

Shweta Punj, Senior Associate Editor, Business Today
If the recently announced Foreign Trade Policy was an extension of Make in India -emphasising on ease of doing business, digitisation of all documents and focus on defence exports-the Defence Procurement Policy, which was to be announced in March but is still awaited, will have to answer several questions left unanswered by the grand Make in India campaign and Foreign Trade Policy. It will be the 'How' of What.

Prime Minister Narendra Modi and Defence Minister Manohar Parrikar have emphasised the need for simpler and more transparent defence procurement procedures. In the current scenario, India's regulations are so prohibitive that even the government is unable to purchase defence equipment made in India.

Countries such as France, the United Kingdom, Israel and South Korea - which have gone on to build a robust domestic defence industry-focused on their capabilities and competencies. And after capabilities were chosen, they made a concerted effort to develop those capabilities, streamlined procurement processes and created a level-playing field.

Raising FDI in defence to 49 per cent is the first, tentative step towards creating a dynamic industry with state-of-the-art technology. But India will have to contend with being one of the largest importers of defence hardware in the world for quite some time. India's supplier base is closely linked to its geopolitical relations.

For instance, its strategic relationship with Russia was strengthened by its willingness to share top-of-the-line technologies.

Even as India embarks on another journey to build trusted relationships with its potential suppliers such as France and the United States - Prime Minister Narendra Modi ordered 36 French-made Rafale fighter jets on his visit to Paris last week- it will have to shore up its abysmally poor design capability in critical technologies.

Self-reliance trends present a very discouraging picture - a committee under A.P.J. Abdul Kalam had recommended the need for India to increase its self-reliance quotient from 30 per cent in 1995 to 70 per cent by 2005. Until 2013, self-reliance quotient remained at 35 per cent.

Pushing defence exports would require a strategic and concerted effort and the effort will have to go beyond policy to ensure implementation and providing the right ecosystem of trust and innovation for the domestic defence industry to take its first steps.

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