With several large equipment and modernization programs in the pipeline, analysts are projecting an overall spend of USD 80 – 100 Billion in the next 5 years. This makes India one of the world’s most lucrative markets for military products, and defence suppliers are gearing up to compete.
It is expected that India would become the third largest defence spender after the US and China by 2014. Equipment spending by Ministry of Defence increased at 15% – 20% over the last five years, and is expected to continue growing at least in the mid-term. With several large equipment and modernization programs in the pipeline, analysts are projecting an overall spend of USD 80 – 100 Billion in the next 5 years. This makes India one of the world’s most lucrative markets for military products, and defence suppliers are gearing up to compete. There is an urgent need to leverage India’s defence buying clout while negotiating with Foreign OEMs and over any big project, CII said in a note.
India is the biggest arms importer in the world. Defence imports include equipments, weapons systems and platforms. Despite India emerging as a global economic power, 70 percent of its defence requirements are still met through imports. This trend also indicates that the Indian defence industry is unable to meet the requirements of the Indian Armed Forces even after nearly six and a half decades of independence. Due to the strategic reasons, defence production was kept out of private sector’s participation for a long time. Since 2001, things have been gradually changing. However a lot more is required to encourage private sector’s larger participation in the defence sector.
There is no denying that there exists a huge gap between the requirements of the Indian Armed Forces and the combined capabilities of the DPSUs and Ordnance Factories. We are losing out precious foreign currency reserves. We are also unable to create more jobs in the sector which has potential of creating more than 600,000 direct and indirect jobs.
Private sector’s active participation in defence production is the only way out. The ongoing military modernization programmes and resulting procurements worth USD 100 billion over a period of next five years has made India one of the world's most lucrative defence markets. When all the major defence manufacturers are queuing up to utilise this opportunity, we should not shy away from bargaining hard especially when it comes to acquiring high-end technologies. Nominations to DPSUs should be done away with.
Defence is fundamentally a strategic sector for any nation with significant national security implications. The defence industry must be given due to attention and the domestic private players should be encouraged to enter into defence production. Government of India must bring in policies to promote investment and capacity building in this sector through five pronged approach as suggested by this report.
It is imperative that India should leverage private industry as a strategic defence asset and help it to become a full partner in its growth and modernization plans. The increased push for private participation will enable domestic companies to build critical capabilities in areas that were heretofore excluded for them. The multiplier advantages that could accrue in a host of related sectors such as communications, manufacturing, automotive etc, could be enormous. World over, advancements in military Technology have eventually filtered down to other sectors, giving companies a host of comp competitive advantages.
