Will the De­fence Pro­duc­tion Pol­icy 2018 help In­dia switch from be­ing the No. 1 weapons im­porter to an ex­porter?

Electronics Bazaar - - Contents - By Baishakhi Dutta

The draft De­fence Pro­duc­tion Pol­icy 2018, re­leased in March, vi­su­alises In­dia as one of the top five coun­tries in the aero­space and de­fence sec­tors in the com­ing years, with de­fence goods and ser­vices ac­count­ing for a turnover of ` 1.7 tril­lion by 2025.

Prime Min­is­ter Naren­dra Modi’s ad­min­is­tra­tion aims to raise the cur­rent ceil­ing on for­eign di­rect in­vest­ments (FDI) in the de­fence sec­tor from 49 per cent to 74 per cent, ac­cord­ing to a draft of the De­fence Pro­duc­tion Pol­icy 2018 re­leased by the Min­istry of De­fence. As of now, any­thing over 49 per cent is al­lowed on a case-to­case ba­sis.

Ac­cord­ing to the draft pol­icy, achiev­ing the tar­geted FDI would re­quire an in­vest­ment of ` 700 bil­lion and could cre­ate up to three mil­lion jobs. An­other goal is to clock ex­ports worth ` 350 bil­lion by 2025. The de­fence min­istry has sought com­ments and sug­ges­tions about the pol­icy from ex­perts and stake­hold­ers. The draft pol­icy comes at a time when In­dia has been ranked the world’s largest im­porter of weapons for the tenth straight year by the well-known think tank, Stock­holm In­ter­na­tional Peace Re­search Institute.

The gov­ern­ment has iden­ti­fied 12 mil­i­tary plat­forms and weapons sys­tems for pro­duc­tion in In­dia to achieve the aim of ‘self-reliance’. These in­clude fighter air­craft, medium lift and util­ity he­li­copters, war­ships, land com­bat ve­hi­cles, mis­sile sys­tems, gun sys­tems, small arms, am­mu­ni­tion and ex­plo­sives, sur­veil­lance sys­tems, elec­tronic war­fare (EW) sys­tems and night fight­ing en­ablers, among oth­ers.

Ac­cord­ing to the draft pol­icy, the gov­ern­ment not only aims to make In­dia self-re­liant in de­fence pro­duc­tion, but also ful­fil the de­fence re­quire­ments of other friendly coun­tries. The pol­icy states that the li­cens­ing process for de­fence in­dus­tries will be lib­er­alised, and the list of items re­quir­ing li­cences will be re­viewed and then pruned.

The pol­icy fur­ther states that ‘no-ob­jec­tion cer­tifi­cates’ and com­ments from all rel­e­vant agen­cies must nec­es­sar­ily be re­ceived within two weeks of the fil­ing of the ap­pli­ca­tions for li­cens­ing by the com­pa­nies. It also states that the tax regime will be ra­tio­nalised to make do­mes­tic man­u­fac­tur­ing at­trac­tive by en­sur­ing that there is no tax in­ver­sion. Ac­cord­ing to the draft, taxes on the im­port of cap­i­tal goods and ser­vices, in­puts and com­po­nents used in de­fence pro­duc­tion will be ra­tio­nalised.

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