Viewpoint: Make in India for Defence
Unless the government approaches this problem in a slow, steady and more calibrated way, Make in India for military hardware will continue to remain a dream
IN SEPTEMBER THIS YEAR, Prime Minister Modi launched his Make in India campaign in an effort to turn the nation into a global manufacturing hub. This concept is not new to the world as it has been adopted with high degree of success by China as also by a number of countries in East Asia, notably the so-called Asian Tigers. Analysis of all the successful models of domestic manufacturing reveals that the focus invari- ably has been on manufacture largely for exports with only a miniscule share of the production for domestic consumption. This is clearly evident in the way Chinese products have pervaded the markets across the world from the North America to Australia. It is therefore quite understandable that the business and industry segments of the nation have been swept by considerable optimism and euphoria generated across the nation in the wake of the launch of the Make in India campaign. This campaign is important also in the context of the rivalry with China on the economic front. While India took the lead over China in the regime of information technology, China galloped far ahead of India in the manufacturing sector. It is a fact that the manufacturing sector in India is weak contributing only 15 per cent to Indias gross domestic product. This segment of the economy does need radical changes in policies to enable it
revive and compete with the established players in the world. Undoubtedly, this campaign will drive Indias growth story in a new direction and to new heights.
The concept of Make in India is relevant to and beneficial for the non-military segment of the industry as it will open doors for Indian entrepreneurs to the global market resulting in a bonanza for this sector of the economy. However, the situation with regard to production of military hardware is somewhat different. Defence equipment is highly technology-intensive and requires elaborate and expensive infrastructure as well as large pool of highly specialised human resource. The Indian defence and aerospace industry has since independence been the exclusive preserve of the public sector for reasons that at the time of independence, were entirely valid. The investments required were so huge that the private sector was not in a position to afford. Besides, unlike consumer goods, markets for military hardware are extremely limited and restrained by geopolitical paradigms. There are also the issues of quality control and certification that are far more stringent than standards that apply to non-military products. And also, the biggest concern was that of compromise to national security, a problem that is more in imagination and less in the regime of reality. And finally, technology in the domain of defence and aerospace industry is not stagnant, but advances at a frenetic pace calling for frequent upgrade of infrastructure and human skills. All this requires continuous and higher levels of investment. Even the public sector that has monopolised the defence and aerospace industry for over six decades, has not really put in place the level and quality of infrastructure or built up the pool of appropriately qualified human resource to match the aspirations of the Make in India campaign of the Prime Minister insofar as it would apply to the defence and aerospace industry. This segment of the national economic endeavour has not really developed its inner strength, but instead has been content with licensed production, bereft of the benefits of transfer of technology.
As the private sector had been excluded from the defence industrial sector, there has understandably been no development in this respect. Today, while a number of companies in the private sector are keen to venture into the challenging world of defence industry and some have even ventured to make substantial investments in the creation of infrastructure, there is much more to be done both for further development of infrastructure as also the development of the skill base in the country. Unfortunately, both these cannot be created or developed in a hurry.
Given the limitations of the private sector, the defence public sector undertakings (DPSUs) cannot and should not be wished away. The more pragmatic option would be to restructure the DPSUs to enhance their accountability, forge partnership with the private sector and upgrade their capabilities through foreign collaboration. To this end, the government has enhanced the limit of foreign direct investment (FDI) from 26 to 49 per cent. However, at 49 per cent, the foreign investor will have no control and hence this step alone may not help attain the desired goals. Make in India, when applied to the indigenous defence and aerospace industry, will be far more complex than imagined. Unless the government approaches this problem in a slow, steady and more calibrated way, Make in India for military hardware will continue to remain a dream.