In the larger scheme of things, fiscal prudence is a good trait and the reduction in deficits desirable, yet an overtly ambitious approach of reducing deficits into a number game may lead to developments that may hurt us not only in the security arena but in economic growth as well.
The prospects of allocation for the next year being less than the allocation for the current year are remote because of the immense implications it would entail, although it is likely that the growth in the budgetary allocation for the next fiscal may be less than what has been the case in the past.
It is time that India’s offset regulations and defence procurement procedures are weeded for provisions formalising differential treatment against Indian bidders.
MoD has to assume the leadership role and provide some kind of a single-window service to the defence industry to steer the offsets in a direction that helps achieve the objective of modernisation through self-reliance.
On the capital side, there may not be much of an adverse impact of reduction in allocation if the MMRCA contract gets pushed to the next year. On the revenue side, procurement of ammunition and other equipment as well as maintenance of legacy systems would be adversely affected.
A thorough and honest review of the progress made so far is essential for arresting the drift in the Defence Production Policy and for course correction.
This commentary looks at the characteristics of Saab’s recent investments as well as the prospect and challenges for current and future Swedish-Indian collaboration in the defence industrial sector.
Some of the provisions in the DOG do not seem to be well thought out, provide greater leeway to the foreign companies, and have a potentially negative potential on eligible manufacturing sector, particularly defence manufacturing.