Laxman Kumar Behera replies: India’s tryst with indigenisation of defence production has so far not yielded the desired result. This is reflected in the country’s huge arms import which runs into billion of dollars every year. According to US Congressional Research Service (CRS), India ranks third among the developing country, with total arms import valued at US$ 14.2 billion between 2002 and 2009. The heavy import dependency, which is now around 70 per cent, has promoted the Union Defence Minister to describe it as “shameful and dangerous,”

Notwithstanding, the low level of indigenisation the Ministry of Defence (MoD) has taken several key measures, to revitalise the domestic defence industry. Through continuous revision of procurement procedures, the MoD has created more opportunity for the domestic industry to supply various items to the armed forces. Since 2001, the MoD has allowed the domestic private sector to participate fully in defence production. It is expected that the various reform measures taken so far and the on-going debate on initiating more reform measures, such as those pertaining to FDI in defence industry and creation of certain ‘Champions’ in the domain of private sector, etc, will bear fruit in the coming years.

Laxman Kumar Behera replies: The government has in fact taken several measures to bring in the private sector and encourage them in defence production. In 2001, the government liberalised the defence industry, by allowing up to100 per cent participation by private companies in defence production and also allowed foreign direct investment up to 26 per cent. In DPP-2006, the Ministry of Defence introduced an offset policy to leverage India’s huge arms imports towards strengthening domestic industrial capability. In addition, the government has tried to revise its procurement procedures to create more space for the domestic companies to participate in defence production. The ‘Make’ category and the recently announced ‘Buy and Make (Indian)’ provide significant scope for domestic industry, including the private sector, in assuming the role of big system integrator.

Although the government has so far tried its best to involve the private sector in defence industry, there are still few areas of concern that limit its greater involvement in defence production. These concerns are mainly in the form of government’s ‘favouritism’ towards its own enterprises, limited scope for attracting foreign technology, and government reluctance in announcing Raksha Udyog Ratnas (RURs). These concerns need to be addressed so as to create a vibrant defence industry in India, which could lead to higher self-reliance in defence production.