‘From small steps to faster pace, key to de­vel­op­ing In­dia’s de­fence in­dus­try’

SP's MAI - - NATIONAL AGENDA - By Lars-Olof Lind­gren, Chair­man, Saab In­dia Tech­nolo­gies Pvt. Ltd.

In­dia steps into a new era with a new govern­ment, new agenda and the op­por­tu­nity to make fresh be­gin­nings. Over the years, the In­dian de­fence in­dus­try has been tak­ing small steps to­wards be­com­ing a mod­ern, glob­ally com­pet­i­tive de­fence de­vel­op­ment and pro­duc­tion base. It is ap­par­ent that the in­gre­di­ents for mov­ing for­ward at a much faster pace and tak­ing gi­ant strides are present. All that is needed is de­ter­mined ac­tion.

In­dia is to­day a hub for many global de­fence com­pa­nies for high-end de­vel­op­ment work. In­dian en­gi­neers are work­ing – both in In­dia and abroad – on cut­ting-edge de­fence sys­tems. The pri­vate sec­tor has also spent long years get­ting their bear­ings in the sec­tor and some of them have made im­pres­sive in­vest­ments. In­dia has shown re­mark­able ca­pac­ity for ab­sorb­ing tech­nol­ogy: the In­dian armed forces have earned a rep­u­ta­tion of be­ing users with high tech­ni­cal acu­men and abil­ity to ex­tract su­pe­rior stan­dards of per­for­mance from their equip­ment.

Given all these, the time is ripe to act on poli­cies that have been in the mak­ing for a while.

In­dia’s drive to­wards indige­nous de­fence ca­pa­bil­ity re­quires part­ners with state-of-the-art tech­nol­ogy that can be trans­ferred to In­dia with the sup­port of their re­spec­tive gov­ern­ments. More im­por­tantly, such com­pa­nies should be driven by self-in­ter­est to carry out real trans­fer of tech­nol­ogy and have a real in­ter­est in joint de­vel­op­ment of new gen­er­a­tions of prod­ucts.

The chal­lenge is to build do­mes­tic ca­pa­bil­ity with­out fore­go­ing cut­ting-edge sys­tems. The process re­quires In­dian pub­lic and pri­vate sec­tor de­fence com­pa­nies to leapfrog tech­nolo­gies and start de­sign­ing, de­vel­op­ing and pro­duc­ing state-of-the-art sys­tems in the im­me­di­ate fu­ture and not through pro­tracted de­vel­op­ment pro­grammes.

The only way to do so in a rapid way is to make use of tech­nol­ogy de­vel­oped by com­pa­nies out­side In­dia.

Thus far, In­dia has tried to tackle this chal­lenge through strong off­set pro­vi­sions in pro­cure­ment pro­grammes. While off­sets do meet the re­quire­ment of a re­turn on ex­pen­di­ture, it has not proven to be ad­e­quate for de­vel­op­ing an in­dus­trial base.

The end re­sult should be the cre­ation of a de­fence in­dus­trial base that will en­sure that the coun­try does not need to look ex­ter­nally for most of its fu­ture de­fence re­quire­ments. In ad­di­tion, such pro­grammes should have sig­nif­i­cant spillover of tech­nol­ogy to non­de­fence sec­tors.

The en­try of highly tech­no­log­i­cally ad­vanced In­dian pri­vate sec­tor com­pa­nies, which to­day de­sign and en­gi­neer world-class prod­ucts rang­ing from au­to­mo­biles to phar­ma­ceu­ti­cals, tells much about the in­her­ent po­ten­tial to rapidly build an indige­nous de­fence pro­duc­tion ca­pa­bil­ity.

How­ever, most In­dian com­pa­nies are un­will­ing to com­mit to large-scale in­vest­ments with­out a con­tract in place. The be­lief is that there is not suf­fi­cient busi­ness ba­sis for them to take the re­quired risks and ini­tia­tive. In­vest­ments in the de­fence sec­tor are fur­ther slowed down by the eq­uity ceil­ing of 26 per cent for FDI in de­fence. In the ab­sence of the nec­es­sary cap­i­tal in­vest­ments in the pri­vate sec­tor and the over­bur­dened state of the pub­lic sec­tor, it is ap­par­ent that the fun­da­men­tal busi­ness driv­ers for a healthy indige­nous de­fence in­dus­try are miss­ing.

For com­pa­nies to make mean­ing­ful in­vest­ments and bring in cut­ting edge tech­nol­ogy to In­dia, a much higher FDI pro­vi­sion than 26 per cent is es­sen­tial. In many coun­tries, in­clud­ing my own, there is no lim­i­ta­tion for FDI in the de­fence sec­tor at all. As a first step, an in­crease of the thresh­old to 51 per cent is ur­gently called for.

A stronger sta­tus for FDI in de­fence will en­able In­dian com­pa­nies to find mean­ing­ful part­ners who are in­ter­ested in their own sur­vival by in­vest­ing and build­ing prof­itable businesses in In­dia.

Saab is a trusted sup­plier to the In­dian armed forces for over three decades and we bring to In­dia world leading prod­ucts, ser­vices and so­lu­tions rang­ing from mil­i­tary de­fence to civil se­cu­rity.

We are team­ing up with In­dian pub­lic and pri­vate com­pa­nies and lev­er­ag­ing their en­gi­neer­ing and man­u­fac­tur­ing strengths to meet the needs of In­dia as well as for ex­ports of de­fence sys­tems to world mar­kets. Saab is com­mit­ted to true trans­fer of tech­nol­ogy and in­vest­ing in the fu­ture of In­dian de­fence in­dus­try. We are here to stay for the long haul to build an indige­nous de­fence in­dus­try in In­dia.

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