The future of defence offsets policy should be measured by whether foreign procurement is being converted into measurable, cumulative and strategically relevant Indian capability.
The Indian defence establishment is confronted today with what is probably its greatest challenge since Independence. Besides being prepared to wage conventional war on possibly two fronts simultaneously, our Armed Forces need to be geared to undertake this under a nuclear overhang and within a technological environment that encompasses cyber- and space-based threats. There is therefore an imperative requirement for change that would enable us to adapt to the emerging situation. The archaic organisations and processes put in place on achieving Independence must undergo radical overhaul.
This book is a compendium of papers presented and circulated in the International Seminar on Defence acquisition organised by the Institute for Defence Studies and Analyses on July 12-14, 2011. Written by the practitioners, industry leaders and subject experts, the book brings out the best international practices in defence acquisition.
The Monograph provides a comprehensive roadmap for reforming India’s defence offset policy which despite having gone through several rounds of revisions in past decade or so, still lacks effectiveness. The roadmap is based on extensive study of offset practices followed by six countries: Canada, Israel, Malaysia, South Korea, Turkey and the UAE.
The changes proposed in the offset guidelines require a fresh look, both on conceptual and empirical grounds, as the new regime is likely to yield diminishing returns.
The draft offset guidelines 2020, with revamped features, is a bold attempt at attracting technology and investment as well as promoting defence exports. However, the MoD may consider further refining some of the features of the revised guidelines.
A dynamic offset policy has to include a mechanism for identifying the causes for likely delay or default on the part of vendors in discharging their obligation and removing the impediments faced by them
Introduction of the ‘Buy (Indian-IDDM)’ procurement category, the revamped ‘Make’ procedure, structural change in AAP, and higher and flexible indigenous content requirement in certain procurement categories are all likely to deepen the involvement of domestic industry in defence production.
The article assesses the impact of defence offset policy on the Indian defence industry, by taking into account two key parameters—foreign direct investment (FDI) inflows and exports. It observes that the offset policy has a mixed impact. On the positive side, the offset policy seems to have an impact on certain types of exports. On the negative side, the policy has not been a catalyst in bringing in foreign investment and technology inflows into the Indian defence industry, nor has it been successful in promoting its high-end manufacturing.
