Military experts, on Saturday, welcomed the reform measures rolled out by Finance Minister Nirmala Sitharaman to promote the domestic defence industry, saying their proper implementation will help India significantly cut its ballooning import bill on weapons and military platforms.
At a press conference, Finance Minister Nirmala Sitharaman announced a series of initiatives to promote indigenous defence production which included making separate budgetary outlay to procure Indian-made military hardware, increasing FDI limit from 49 per cent to 74 per cent under the automatic route and generating a year-wise negative list of weapons whose import won’t be allowed.
Experts said increasing the existing Foreign Direct Investment (FDI) cap to 74 per cent would encourage global players such as Lockheed Martin, Boeing, Airbus and Dassault Aviation to set up manufacturing hubs in India and bring niche technology without hesitation as the firms will have majority stakes in their Indian subsidiaries.
India is one of the most lucrative markets for global defence giants as it figured among top three importers of military hardware in the world for the last eight years. According to estimates, the Indian armed forces are projected to spend around $130 billion in capital procurement in the next five years.
“Nobody is going to give us critical technology unless we provide them facilities to produce for the global market,” former Army Chief Gen (retd) N C Vij said while welcoming the government’s reform initiatives in the defence sector.
He said India must aim to become self-reliant in defence manufacturing as it would be difficult for the country to keep allocating scarce resources to import expensive weapons and platforms to confront complex security challenges along the northern and western borders.
“The kind of money we require to beat the security challenges is so much. We cannot afford to make that kind of an allocation year-after-year. There is a need for us be self-reliant in defence production, particularly when our economy was hit hard following the COVID-19,” he said.
Lt Gen (retd) Subrata Saha, former Deputy Chief of Army Staff, identified the proposed ban on imports of certain weapons and platforms as the most significant announcement by Sitharaman.
“In the process, the government is giving fixed timelines for indigenous production of specific weapons and platforms. It will make sure that there is accountability,” he said.
Former Chief of Air Staff Air Chief Marshal (retd) Fali Major praised the government’s announcement on corporatisation of the Ordnance Factory Board, the nearly 200-year-old organisation that operates 41 ammunition production facilities across the country.
“I welcome the reform initiatives. Raising of the FDI limit will give major impetus to defence production in India,” he said.
Lt Gen Saha also lauded the announcement by Finance Minister Nirmala Sitharaman that separate allocation in the budget would be made to procure India-made military hardware besides the proposed setting up of project management teams to oversee implementation of specific programmes.
Another defence expert, Lt Gen S L Narasimhan said the reform measures were in the offing for quite some time and that they would give a major push to the Make in India initiative in the defence sector.
Gen Vij felt Finance Minister’s announcement would help India realise its goal of achieving defence exports worth $5 billion in next five years.
“The reform measures are very timely and they will significantly boost our defence industry,” the former Army Chief said.
In February, Prime Minister Narendra Modi set a target of $5 billion worth of military exports in the next five years and invited global defence majors to set up manufacturing hubs in the country.
In her announcement, Finance Minister Nirmala Sitharaman also said the process for the General Staff Qualitative Requirements (GSQRs) would be made realistic. In the GSQRs, the armed forces define criteria to procure platforms and hardware.
India was among the world's three top importers of military hardware.
According to a latest report by the Stockholm International Peace Research Institute (SIPRI), a leading think-tank on military spending, India’s defence expenditure stood at USD 71.1 billion in 2019, which is the third highest after the US and China.
In 2017, the government came up with an ambitious policy under which select private firms were to be roped in to build key military platforms like submarines and fighter jets in India in partnership with global defence majors.