Defence industry perks up: India’s decades-old ambition and its paradoxes

Source: The post is based on the article “Defence industry perks up: India’s decades-old ambition and its paradoxes” published in the Business Standard on 10th December 2022. 

Syllabus: GS3- Security 

Relevance: Issues related to defence manufacturing 

News: The article explains the scope of defence production in India. It also explains the challenges faced by the defence production sector. 

What is the current situation of defence manufacturing in India? 

India is the second-largest importer of defence hardware.  

India has the third or fourth-largest budget for defence research and development. The money spent is a lot less than by either the US or China. It is bigger than the defence R&D budgets of the UK, Germany, and France, all of which make frontline defence weaponry in a way that India does not.  

In fact, for leading public sector defence companies in aerospace and electronics, R&D has accounted for a bigger share of total expenditure than the international average. 

Defence production has been more or less static in dollar terms. This is also the case with defence exports. 

What are some steps taken by the government for boosting defence manufacturing? 

The government is opening up the defence sector to private manufacturing. The finance minister in her last Budget speech said that a quarter of defence R&D spending funded by the government would be done by private industry and in non-government institutions. 

The C-295 transport aircraft will be made by a Tata-Airbus joint venture. Howitzers are being made by Larsen & Toubro and Bharat Forge.  

On the R&D front too, the government has set up a Defence Innovation Organisation. Its executive arm has funded well over a hundred R&D projects in the field of drones, robotics, artificial intelligence, and advanced materials.  

In addition, some start-ups produce dual-use products for image recognition, wearable technology, and the like.  

What are the issues faced in defence production? 

The defence procurement system remains a stumbling block for many. The armed forces take too long to accept products based on domestic R&D.  

The standard practice of going for the cheapest bidder does little to encourage vendors who have developed technology with government funding. 

What is the scope for defence production in India? 

Production-linked incentive scheme has just been announced for the manufacture of drones and drone components might make a difference. 

Private participation in defence exports: Tesla is said to have shown interest in locally developed materials technology for the faster charging of batteries. Two companies have won export orders for the Pinaka rocket firing system. Malaysia signed a memorandum of understanding with Hindustan Aeronautics for the Tejas fighter this year. 

The government no longer claims ownership of the intellectual property created with government-funded research. Companies are therefore better positioned to raise capital for moving to the production stage. Defence Research and production could emerge as a genuine export story for India.