Journal of Defence Studies

India’s Defence Spending: A Trend Analysis

In past two decades, the Army has witnessed a decrease in its share in the overall budget, whereas the Navy and the Air Force have increased their respective shares. This reflects a shifting priority, from land-centric armed force to an air and naval-centric force.

Planning for Sound Defence Budgets

Greater attention is needed in the areas of formulating a national security strategy in a systematic manner; effecting greater synergy between defence and national plans; capabilities-based planning and greater integration among the Services.

Address at the Inaugaral Session of the Seminar on Defence Budget

Defence budget accounts for a significant proportion of the central government expenditure. For the current year, the revenue and capital budgets of defence account for more than 20 and 80 per cent of the entire non-plan revenue and capital budget respectively of the central government. This translates into Rs 57,593 crores as revenue budget and Rs 48,007 crores as capital budget for defence. Allocation for defence has generally been the second largest single head of expenditure in the nonplan segment of the central budget.

Offset Absorption: Adding Arsenal to Armament

Considering the volume of defence expenditure planned in the 11th Five Year Plan and in the future, it is certainly befitting for each recipient service to debate methods and procedures that offset this expenditure and contribute towards the economic and technological development of the country.

What India can learn from Global Offset Experiences

Boeing has successfully implemented offset programmes in over 35 countries completing over $29 billion in offset commitments and we are currently engaged in executing over 45 active programmes valued at over $14 billion involving 18 countries. Therefore, we have some relevant experience in this area.

Enhancing Manufacturing Capability for Efficient Offsets Absorption

Since Independence, as a policy, Defence R&D in India had been reserved for the state sector with the DRDO having been established with the mandate to conduct research into Defence areas. Defence Public Sector Undertaking units (DPSUs) and Ordnance Factories (OFs) were set up with the twin objectives of:

Keynote Address at Defence Offsets Seminar

Offsets are today a common feature of international arms trade. It is estimated that offsets and related forms of counter-trade constitute 5 to 30 per cent of global trade. More than a hundred countries use the mode of offsets in their arms contracts. Business and trade analysts put the exact volume of defence offsets at the global level at over $5 billion each year. The United States, the biggest arms exporter in recent times, is obviously one of the largest providers of offsets.

Implementation of Offset Policy in Defence Contracts: Indian Army Perspective

The Offset Policy has been articulated in the DPP 2008. The Offset Clause would be applicable for all procurement proposals where indicative cost is above Rs. 300 crores and schemes are categorized as ‘Buy Global’ involving outright purchase from foreign/Indian vendors and ‘Buy and Make with Transfer of Technology’ i.e. purchase from foreign vendor followed by licensed production.

Industry Perspectives on Defence Offsets

Defence offsets are expected to generate business in India of about $10 billion over the next five years. Some would be in the form of tangible product and service exports while some in the form of investments made in India, and perhaps technology transfers, and yet some would be reduced through multipliers, banking, etc. We can assume that genuine export business could be $1 to $1.5 billion a year. Large as these may appear, in a trillion dollar economy, the direct impact is less than 0.2 per cent.

Background Paper

Definition, Forms and Types of Offsets Offsets

Gearing up for the Defence Exports: Challenges, Opportunities and Pitfalls

India has made rapid strides in defence technology in recent past and reached a stage of self-reliance. The objective was to have thrust in indigenous production and exploring possibilities of exports to other developing nations that may look forward to supplies from India.

In spite of the potential the country had in defence production, in the form of resource capability, know-how and technical expertise, but due to lack of clear policy had prevented its full exploitation. One can assume that our defence industrial policy broadly consists of the following-

Essential Elements of India’s Defence Offset Policy – A Critique

Offsets have been variously defined. In essence, offsets in defence, as in civil trade, are compensations that a buyer seeks from the seller for the purchase of goods and/or services. The demand for offsets in defence has exhibited an upward trajectory since the 1950s.1 It gained further momentum in the 1980s and has been growing ever since.

Offset Absorption Roadmap for the Indian Air Force

Offsets in some form or the other have been practiced in many countries over a long period of time. Even in India, licensed production contracts and technology transfer contracts with the erstwhile USSR were a type of offsets. However, Defence Procurement Procedure-2006 (DPP-2006) had streamlined the process to a great extent. DPP-2008 has refined the policy further.

Offset Investment Inflow Priorities for Ordnance Factories

Offset agreements are formal arrangements of trade where some sort of leverage is exploited by a buyer to obtain compensatory benefits in the case of high value off-shore purchases by forcing the seller to undertake well-designated activities for enhancing competitiveness, up-gradation of technology for domestic industries, additions to exports, up-gradation in the infrastructure in appropriate domestic sectors, etc. Though these are business deals with built-in reciprocity clauses, it is not a matter of establishing desired equivalence of inflow and outflow resources.

Technology Inflows: Issues, Challenges and Methodology

The defence offset policy mandates the foreign suppliers to plough back a minimum of 30 per cent of the contractual value of projects worth Rs. 300 crores or above to the domestic defence industry. The offset route is intended to strengthen the domestic defence industrial base through a combination of technology transfer, investment in R&D and in production facilities, besides export business generation. From the national view point, the offset aims self-reliance and indigenous capability enhancement in the vital defence sector involving advanced technology.

Offset Policy framework

I shall basically discuss the road map which we have offsets in the country. We in fact have a very good phrase called quasi direct offsets for our system. It is not as direct as is understood internationally and a foreign OEM can in fact buy ships from India if they were to supply multi-role combat aircrafts. While this is true of all the offset proposals in the Ministry of Defence, I would like to mention that barring two or three cases, all cases are in fact ‘direct’ as is internationally known.

Leveraging Defence Offset Policy for Technology Acquisition

Offset provisions were promulgated by Ministry of Defence (MOD), Government of India in DPP-2006 [1], and revised in DPP 2008 [2]. These provisions are applicable to all Capital Acquisitions categorized as ‘Buy (Global)’, i.e., outright purchase from foreign / Indian vendor, or ‘Buy and Make with Transfer of Technology’, i.e., purchase from foreign vendor followed by Licensed production, where the estimated cost of the acquisition proposal is Rs. 300 crore or more.

Prahlada , S. Radhakrishnan , Parimal Kumar |
January 2009 |
Journal of Defence Studies

Special Address at Defence Offset Seminar

The timing of the seminar is very apt and we are at a stage when we have made some headway and we can actually deliberate on certain issues relating to the subject. The entire exercise of introducing offsets and formulating and promulgating a policy in this regard is aimed at encouraging sound relationship between the defence industries of the advanced countries and those of our own. Fortunately, we have a reasonable depth in our industry and there is a plenty of promise.

A Survey of Successful Offset Experiences Worldwide

In venturing to write about successful offset policy and experience in different countries, the basic problem faced is that of unavailability of data. There are no universally laid down parameters or measures to weigh the costs and benefits of offset programmes. Even if some countries have individually undertaken an exercise to evaluate such costs and benefits, the information is not always available in the public domain. Cross country comparisons would also not yield consistent results.

Integrating the Indian Military:Retrospect and Prospect

Wars are not fought only by the armed forces, but by the entire nation, the government and all its organs, the media and the people in an integrated and unified manner. The Kargil war was one such event that unified the nation. The political, diplomatic and military insights gained during the conflict have tremendous learning value for our politico-military structures and processes. It was with this purpose of learning lessons and sharpening our higher defence management that the Kargil Review Committee was formed in the aftermath of the Kargil War of 1999.