Thursday, December 2, 2021

‘MAKE IN INDIA (DEFENCE)’ : ON THE PATH TO SUCCESS

by Gen Bikram Singh (r)

“I want to tell the people of the whole world: come, make in India. Come and manufacture in India. Go and sell in any country of the world, but manufacture here. We have the skill, talent, discipline and the desire to do something. We want to give the world an opportunity that comes to make in India.” Shri Narendra Modi, Honb’le PM

“Make in India” a flagship initiative of Prime Minister Modi was launched in September 2014 to transform India into a global manufacturing hub by creating an ecosystem that would encourage investments by both multinational and domestic companies and enhance the global competitiveness of the Indian manufacturing sector. The programme focused on promoting innovation, enhancing skill development, protecting intellectual property and creating a conducive business regulatory environment. From the original number of sixteen the initiative has grown to twenty –five sectors which include both, manufacturing and service.

Despite falling short of realizing the yearly targets set in 2014, the comprehensive approach of the government helped improve India’s ranking in the ease of ‘Doing Business’ (DB). The World Bank’s October 2019 report placed India at 63rd position in DB as compared to the 77th position in 2018 and 100th position in 2017. The parameters that improved the ranking pertained to simplification of the processes for starting business, dealing with construction permits, trading across borders and resolving insolvency.

The improved investment climate has increased the inflow of Foreign Direct Investment (FDI). According to the figures given out by Finance Minister Nirmala Sitharaman during the presentation on the Union Budget 2020-21, the FDI into the country had increased from US $ 190 billion during the period from 2009 to 2014 to US $ 284 billion from 2014 to 2019. While the defence sector struggled to attract the desired levels of FDI, the sectors that attracted maximum foreign inflows included services, telecommunications, computer software and hardware, automobile and trading.

However, given the reforms implemented thus far coupled with the government’s multipronged proactive strategy, which is being unfolded with zealous commitment, the defence sector is destined to succeed over time. Seeds sown since 2014 have already begun to sprout and in some cases even bear fruit. As per the details shared by the government in the Lok Sabha in August this year, India is exporting defence equipment to more than 75 countries and the major arsenal exported from 2014 to 2021 included armoured protection vehicles, light-weight torpedo, weapons locating radars, fire control systems and tear gas launchers. The aggregate defence exports in the last seven years stands at IRS 38,500.25 crore.

The Defence Acquisition Procedure (DAP) 2020, which came into effect on 01 October 2020, is a well processed industry-friendly document that has been diligently prepared through a consultative process by the Ministry of Defence. It supersedes the erstwhile Defence Procurement Procedure (DPP). Besides streamlining and simplifying the acquisition process, DAP 2020 ensures enhanced transparency in the selection of best equipment in a competitive manner, reduces timelines and provides adequate opportunities to capable vendors.

Pursuing the end state of ‘self-reliance’, the DAP also lays greater emphasis on indigenising arms manufacturing. The Ministry of Defence has also come out with a list of 108 types of military equipment, vehicles, helicopters, ships, weapons and ammunition that will be progressively banned from being imported from December 2021 to December 2025. Separate chapters included in DAP 2020 also cater for specialised acquisition through the Defence Research and Development Organisation (DRDO) and Defence Public Sector Undertakings (DPSUs), procurements in relation to Information and Communication Technology Systems, leasing of equipment and issues related to post contract management.

The Defence Offset Policy has been revised. It aims to leverage the capital acquisitions and technology to develop Indian defence industry by fostering development of internationally competitive enterprises and enhancing capacity for research, design and development in relation to defence products. The changes have been made in the avenues for discharge of offset obligations, the list of items eligible for offset transactions, and multipliers applicable in various situations. The avenues for discharge of the offset obligation have also been revised to allow Indian industry to receive technologies for which the foreign vendors will now be entitled to receive direct credit. The higher technologies are, however, reserved for the government entities namely, the DRDO and DPSUs.

The corporatisation of the Ordnance Factory Board (OFB) is a long-awaited constructive step. The dissolution of the OFB with effect from October 1, 2021 and the creation of seven newly constituted Defence Public Sector Undertakings (DPSUs) will improve competitiveness, product quality and overall accountability. Substandard and defective ammunition and armament supplied by the OFB has taken a heavy toll on Army’s resources. In 403 accidents from 2014 to 2020 the Army suffered 27 fatal and 159 non fatal casualties and a financial loss amounting to Rs 960 crore.

The growing interest of the international community in the ‘Make in India’ initiative was evident from the exuberant participation of foreign delegates in Raksha Mantri Shri Rajnath Singh’s interaction on the DefExpo 2022 with the ambassadors/ heads of missions and Defence Attaches on 25 October 2021. Over 200 delegates attended the event. In his briefing on the DefExpo 2022, which is scheduled to be held at Gandhinagar, Gujarat in March 2022, the Raksha Mantri reiterated the Prime Minister’s vision and emphasised the mantra of shared prosperity the joint ventures and international partnerships would promote. He said -“Resurgent India, where defence manufacturing is an identified pillar of growth, will display its ability to take lead at DefExpo 2022. I am confident that pursuing the vision of our Hon’ble Prime Minister Shri Narendra Modi, DefExpo-2022 will sow the seeds of successful new ventures and international partnerships to promote shared prosperity, boost investment, expand manufacturing and bolster aerospace and defence ecosystem in India, which shall be ready to serve the defence requirements of our friendly countries also.” In his exceptionally well articulated address, he also highlighted India’s potential for R&D in space, cyberspace, futuristic capabilities & disruptive technologies along with the increase in the defence capital outlay in the annual budget of 2021-22, which has also been increased by 18.75 % from the preceding year. The policy reforms, he added were drawing greater interest from Indian and foreign defence manufacturers, innovators, MSMEs.

The growth in exports over the last five years alludes to the gradual consolidation of the Make in India defence sector as well. However, a lot needs to be done to augment defence exports to sustain the economic base of the defence industry in the current economic environment. For augmenting foreign and domestic investment and boosting exports, there is a need to continue with outreach efforts to acquaint the friendly countries and various stakeholders of our intent and hitherto achievements in terms of defence R&D and production, application of modern technologies and liberalised collaborative policies. The Indian Missions abroad should be mandated to organise summits, road-shows and undertake other promotional activities to attract investment. Government officials from the concerned ministries and corporate leaders should participate in such outreach programmes.

Moreover, we need to keep an eye on the parameters that are being revised by the World Bank’s on DB to ensure the programme remains aligned with the international requirements. Concurrently, it needs to be ensured that in the identified defence industrial corridors, besides the ‘Plug and Play’ support, we provide a peaceful and supportive environment that helps build and strengthen mutual trust amongst various stakeholders. A conducive environment will certainly encourage the domestic and overseas manufacturers to invest and ultimately help India achieve the stipulated target USD 5 Billion in defence export by 2024.

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