Developments in India's defense sector
The government of India has struggled to build a strong domestic defense-industrial base due to inadequate investment in research and development and corruption in procurement. Scandals under the previous Minister of Defense, A.K Antony, related to stalled purchases and policies, worsened the environment for domestic defense manufacturing. India remains the world’s largest importer of arms, importing 14% of global imports of weaponry between 2011-2015. India’s primary supplies are Russia, Israel, France, and the United States. The government of India is looking to reduce dependency on foreign arms manufacturers and to catalyze domestic manufacturing capabilities. The ‘Make in India’ initiative is seen as a launch pad for the structural and regulatory changes needed to boost India’s defense-industrial base.
The defense sector has seen many encouraging changes. In July 2015, the former Home Secretary, Dhirendra Singh, convened a committee to improve defense procurement. The ten member expert committee put forth policy recommendations to increase private sector participation in the defense industry. The committee proposed three models for cooperation with the private sector: Strategic Partnerships, Developmental Partnerships and Competitive Partnerships. Within this model, there would be six groups of Strategic Partnerships: aircraft, warships, armored vehicles, complex weapons, surveillance, and critical materials. In order to prevent “conglomerate monopoly,” the Committee suggests identifying one or two private sector companies for each of the six Partnerships to limit competition. The committee also recommended ending the practice of single bid rejections, which hamper the interests of local industry and delay procurement. The major focus of the committee is to streamline the acquisition process and encourage domestic manufacturers.
As a result of limited domestic defense manufactures, India continues to develop partnerships with foreign companies. The Cabinet Committee on Security sanctioned the purchase of Boeing’s Apache and Chinook helicopters for the Indian Air Force for $2.5 billion. Russia has also entered into a strategic partnership with India under the ‘Make in India’ initiative. The partnership will focus on two key areas: nuclear and defense. The two countries signed 16 MOUs, which will allow Russia to sell military helicopters and construct nuclear reactor components.
In its efforts to develop the defense industry, The Ministry of Defense and the Skill Development Network Trust for Collaboration on Technical and Program Management Support signed an MoU. Through this collaboration, the two agencies plan on using employment training programs to help service men and women nearing retirement find employment in the private sector.
In 2015, the government issued 56 licenses that authorized multinational companies such as The Mahindra Group, The Tata Group, and Pipavav to set up production units. The reforms seem to have gained the confidence of the global defense industry, with $3.5 billion entering the Indian economy in foreign investments. In the first half of the current fiscal year, $64 million of military equipment during the first six months - a threefold increase over last year’s $19 million.
What lies ahead?
In April 2016, the United States Defense Secretary Ashton Carter will visit to India and is expected sign three outstanding defense agreements between the two countries. Later on in 2016, a $3 billion bilateral military deal with Israel is expected to be confirmed.
The Ministry of Defense sees the importance of design and development in the defense sector. Analysts expect this will result in increased funding for research and development. Additionally funding will also ensure that scientific talent in India is engaged in developing cutting-edge technologies to enhance the defense capabilities of the country.