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Anjali Ranawat asked: How far has India met the target of achieving $25 billion defence production by 2025, and what needs to be done to boost the defence industry to achieve the same?

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  • Amit Cowshish replies: The draft Defence Production and Export Promotion Policy (DPEPP) 2020 aims at achieving a turnover of Rs 1,75,000 crore (US$ 25 billion) by 2025, but no mechanism seems to be in place to aggregate the annual turnover–broadly defined as the value of sale–of the entire Indian defence industry, including the private sector entities.

    Some inference can, however, be drawn from the capital expenditure on acquisition of defence materiel by the armed forces from indigenous sources over the last 10 financial years, assuming this expenditure to be the combined turnover of the public and private sector defence production units.

    According to the information available in the 28th Report of the Standing Committee on Defence (17th Lok Sabha), submitted to the parliament on 11 March 2022, this expenditure increased from Rs 33,632.87 crore in 2011–12 to Rs 39,751.64 crore in 2015–16 and thereafter almost doubled to Rs 77,132.48 crore in 2020–21.

    Back-of-the-envelope calculations indicate that if the expenditure on capital acquisition keeps increasing at the average growth rate of the previous five years, it could reach approximately Rs 1,30,000 crore in 2024–25.

    The government has made several changes in the policy and procedures to prioritise the acquisition of indigenously designed and developed products, involve the private sector in research and development of futuristic equipment and technologies, promote innovation, ensure local manufacture of imported equipment, and make it easier to do business in the defence sector.

    In practice, however, some of these policies and processes continue to be ambiguous, cumbersome, inflexible, and time-consuming. Consequently, the future course of defence production in India will depend to a large extent on continuous refinement of the policies and procedures to make them nimble, formulation of realistic services qualitative requirements, the synergy between various agencies of the Ministry of Defence and the industry, financial viability of acquisition plans, budgetary support, effective monitoring of the acquisition programmes, and, above all, the speed and quality of decision-making by the military and civilian bureaucracy.  

    Posted on 22 March 2022

    Views expressed are of the expert and do not necessarily reflect the views of the Manohar Parrikar IDSA or the Government of India.