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

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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.

Air Mar­shal B.K. Pandey (Retd)

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