The intention of the JV guidelines notwithstanding, the policy document suffers from certain weaknesses which may impact its objective of enhancing national defence industrial capability.
Notwithstanding positive developments over the last decade, certain grey areas in industrial licensing and FDI policy need further improvement to facilitate the private sector’s more meaningful participation in the Indian defence industry.
International economic circumstances are propitious for India and Indian defence companies to strike deals that would help reduce dependence on foreign sources for defence needs.
Given the sensitivity attached to defence-related FDI, each investment should be subject to wider review and impact analysis following which the FDI percentage could be determined varying between zero and 100 per cent.
India’s increasing reliance on FMS route is indicative of its desperation to bridge the gaps in its defence preparedness and shows the weakness of the Defence Procurement Procedure.
If basic equipment shortfalls that the defence sectors face are to be addressed, then Indian defence planners need to use the DEI framework to create solution models.
While India’s latest defence budget has no doubt catered for a sizeable capital component, it may be prudent to reduce costs by switching to more affordable programmes.
While Mahindra’s foray into defence production and the acquisition of foreign companies demonstrates the private sector’s initiative, the government needs to introduce further reforms to promote the role of private companies in Indian defence industry.
The effectiveness of the procurement process needs to be viewed in context of the operational and structural readiness of the armed forces. If the existing framework proves to be weak and unable to deliver required levels of military preparedness, the framework may have to be re-laid for its effectiveness and deliverability.
With the growth of the public sector in Defence Production a large number of industrial units in the Private Sector has also grown with varied scales of operation in areas like outsourcing of raw materials, components, sub-systems, assemblies and sub-assemblies.
