FROM THE EDITOR-IN-CHIEF
Make in India was one of the key planks of Narendra Modi’s governance agenda and was announced with great fanfare. The programme was intended to revive manufacturing in India, currently a mere 16 per cent, to an ambitious 25 per cent of the GDP and provide much-needed jobs. The lynchpin of this was the indigenisation of defence manufacturing, which would also reduce India’s dependence on defence imports. It seemed eminently doable. The government was the sole customer and the needs well-known. It was a commendable plan as the defence industrial complex has, in many countries like the US and Russia, provided a stabilising economic foundation and supported pioneering research and transformative technologies, from semiconductors to the Internet. Given that India has the world’s third largest military and the sixth largest spend on defence, it would have done the same for us. In addition, there is the major benefit of substituting our defence imports, which account for nearly 60 per cent of our military hardware. India has emerged as the world’s largest arms importer, accounting for 13 per cent of all global arms sales between 2012 and 2016.
Our cover story this week examines the reasons for the Modi government’s poor record at rebuilding defence production despite seemingly liberal measures such as opening up the defence sector to FDI of 49 per cent and above in certain cases, introducing a specific category to promote indigenous manufacture, and roping in the private sector. Despite these noble intentions, the effort has been a dismal failure. What was not accounted for was classic bureaucratic lethargy, deliberate or congenital. The proverbial kiss of death of government undertakings has contributed to the mess. Defence public sector units are an elephantine complex, consisting of eight companies, 41 ordnance factories, 52 research labs and employing 200,000 people. Despite this massive infrastructure, they are unable to meet the needs of the armed forces. The problem is, they are inefficient—the defence public sector undertakings (DPSUs) have an average labour productivity of around $67,000 that is one-fifth the $370,000 average of the world’s top five arms producing companies. That’s not all. Most of the equipment produced by DPSUs is under licence from foreign firms.
Although a defence ministry task force recommended strategic partnerships with private players in 2016, it is yet to approve the policy change. Strategic partnerships call for creation of joint venture concerns between private sector firms and foreign partners which, with the involvement of major industrial houses, could well fill the enormous gap between demand and supply. Especially, as over the next decade, the armed forces need at least 400 fighter jets and 800 to 1,000 helicopters, according to Defence Minister Manohar Parrikar’s own admission. Sadly, as he tells Executive Editor Sandeep Unnithan in an exclusive interview, he is not willing to sacrifice the public sector for it. As Unnithan notes, one of the cornerstones of ISRO’s success has been the involvement of the private sector in building rockets and the creation of a large vendor base that supplies key components for its space programme. Both are missing when it comes to defence production.
In 1995, the A.P.J. Abdul Kalam committee had said India needs to make 70 per cent indigenous content by 2005. Parrikar says we can achieve 60 per cent by 2019. Yes, transformations are possible. China, the world’s largest arms importer a decade ago, is today the world’s third largest arms exporter. Despite the clear direction given by the prime minister, it’s a pity one of his flagship schemes has floundered. Its success would have yielded rich dividends for the country.
(Aroon Purie)