A joint study by ASSOCHAM and Ernst & Young (E&Y) has recommended that the government should fund 80 per cent of defence research and development (R&D) in the private sector. The report noted that since defence R&D was “fraught with risks,” the private sector was unlikely to come forward unless it was adequately encouraged through greater financial assistance.1

Currently, almost the entire defence R&D is undertaken by the DRDO, which has an annual budget of Rs. 8511.54 crores, representing six per cent of total defence budget for 2009-10.2 However, under the ‘make’ procedure of Defence Procurement Procedure 2006 (DPP 2006) and its subsequent version, i.e., DPP 2008, the DRDO is responsible for development of systems which are of “strategic, complex and security sensitive” in nature. Other products which are of “low technology and mature system” and “high technology complex system” would be developed by any player(s) in Indian defence industry, either in the private or public sectors. For products in non-DRDO sector, the developmental cost would be shared “in the ratio of MoD (80 per cent) and the industry (20 per cent).”3

• 1. “Govt. Ought To Fund 80% Of Defence R&D: E&Y–ASSOCHAM,” at http://www.assocham.org/prels/shownews.php?id=2189
• 2. Government of India, Ministry of Defence, Defence Services Estimates: 2009-10.
• 3. See government of India, Ministry of Defence, Defence Procurement Procedure (Capital Procurements), p. 140.