New Delhi . 07 December, 2015. “India can be a global manufacturing hub for defence sector” noted AK Gupta, Secretary (Defence Production), Ministry of Defence, Government of India, today. Gupta was delivering the annual YB Chavan Memorial Lecture on ‘Make in India: The Way Ahead for Indigenous Defence Production in India’ at the Institute for Defence Studies and Analyses (IDSA) on November 7, 2015. Defence manufacturing has been identified as one of the top 25 sectors under the Government of India’s flagship ‘Make in India’ initiative.

Gupta noted that although it may not be possible in a “globalised and integrated world to manufacture each and every part or component of an equipment in one country or at one location, the endeavour is to do significant amount of manufacturing and design work within the country”.

Speaking on India’s goal to achieve “70 per cent indigenisation by 2027”, he said that it would present a huge opportunity to the Defence Public Sector Undertakings (DPSUs), Indian private players and Micro Small and Medium Enterprises (MSMEs). The Indian Defence Industry is currently dominated by DPSUs and Ordnance factories that contribute to 90 percent of total domestic manufacturing output and employs close to 1,60,000 people. Since the opening of private sector participation in 2001, 182 companies have been issued 307 industrial licenses and 50 companies have commenced production, he reflected.

Liberalisation of foreign direct investment (FDI) Policy, validity of Industrial license from three years to 15 years, finalisation of Defence Security Manual and removal of anomalies in custom and excise duties are some of the initiatives taken to promote private sector, he pointed out.

Insisting that ‘Make in India’ should reverse the current imbalance between import and indigenous manufacture,Gupta cautioned that it would will be a gradual, step by step process, based on the technologies and manufacturing complexities. He said that it is imperative for the government to support the Indian firms on a long term basis during this transition.

Drawing reference from the report submitted by the Expert Committee constituted under the Chairmanship of Dhirendra Singh for the purpose of evolving a framework to facilitate ‘Make in India’, Gupta pointed out that though India’s strategic policy in the initial years was to “maintain peace by striving for good relations with neighbours and not by proactively arming itself to deter any aggressor”, a series of events commencing with deterioration of relations with China in the late 1950’s, led to a shift in policy. The Department of Defence Production was set up in November 1962 with the objective of developing a comprehensive production infrastructure to produce the weapons/ systems/ platforms/ equipments required for defence.

The economic crisis of 1990-91 accelerated the liberalisation process. Controls were removed and market forces were restored. “The sector for the first time was opened to Indian private sector participation, with FDI up to 26 per cent, both subject to licensing.” This led to a paradigm shift from the ‘buyer-seller relationship’ to ‘co-production, co-development and joint research & development’.

Earlier, while introducing the speaker and the subject, Director General, IDSA, Jayant Prasad mentioned that what ever the Government of India might be planning as a part of the new procedures, the two specific suggestions that could be considered are i) since domestic defence-related R&D is not mature enough, India should encourage offsets in defence component manufacturing in India, both for domestic use and for incorporation in third country sales of these items by Indian vendors and ii) in order to promote export of Indian defence manufacturers, they should be free, to the extent possible, from imported component or systems from third countries that feature in heir export control lists.