India is one of the largest importers of conventional defence equipment and spends about 31.1% of its total defence budget on capital acquisitions and about 60% of its defence requirements being import dependent. Between 2006-10 and 2011-15 India’s defence imports increased by almost 90 per cent and now India tops the global arms import list with14% global share.

New Defence Procurement Procedure (DPP) 2016 has a focus on achieving the “Make in India” vision by according topmost priority to ‘Buy Indian – IDDM (Indian Designed, Developed and Manufactured)‘ and ‘Buy (Indian)’ categories.

India’s Defence Minister Manohar Parrikar has set a target to raise India’s defence exports to $ 2 billion in the next two years which is currently over $ 330 million. India’s export vision in defence depends on the encouragement to MSMEs.

With world economy still reeling under slowdown, major international players in the defence sector are looking to cut costs. The time is ripe for the MSME sector to fill the gap not just in India but also globally with exports.

MSMEs & SMEs already contribute significantly to defence manufacturing with around 10,000 quality products along in defence sector. Despite having reasonable resource capability, know-how and technical expertise, lack of clear policy had prevented their full exploitation in terms of defence exports.

Separate defence exports incentives with increased budgetary allocations along with special subsidies in the Foreign Trade Policy can enthuse the industry with more MSMEs participating in the manufacturing of defence exports items from India.

The revised DPP has already stipulated giving desired thrust to the make in India initiative advocating for the strong alliance with MSMEs. However, this is not enough to fulfil India’s export dream.

The need of hour is working for the delivery of quality products matching the global defence requirements; the policy must encourage innovations along with the increased budget for R&D. The policy of maximizing indigenous production without well supported R&D policy back-up will not bring tangible results.

Transfer of technology along with the knowledge transfer will also play a huge role in optimization of defence exports. Export strategy has to clearly address the cause of transfer of technology and IPR concerns for seamless long term association with the partnering company or country.

There is a need for greater coordination between different departments for streamlining the permissions and making it single window for smoother execution. Along with it there is also greater need for smoothening the window for exports. A successful interlocking set of relationships between the military, private sector, universities, and the political will is also needed.

Defence offset policy will contribute to enhanced defence exports. Offsets are also seen as a mechanism to develop indigenous manufacturing capability. They create jobs, enhance scientific and engineering skills, promote small local manufacturers, and will lead to enhanced exports.

There are 193 countries which are member of UN and clearly we need to put serious marketing efforts to showcase our capabilities and strengths to attract more overseas customers and participants for co-manufacturing and buying of our products. Therefore, essentially we need to identify the potential markets for exports that would be most attractive and where we would have a definite edge, keeping in view our present capabilities and ability to deliver.

The good news is that opening of the defence sector for private sector participation is motivating foreign original equipment manufacturers to enter into strategic partnerships with Indian companies and develop the domestic industry for global competiveness.

Many big companies like Airbus (France), BAE India Systems (UK), Pilatus (Switzerland), Lockheed Martin (USA), Boeing India (USA), Raytheon (USA), Israel Aerospace Industries (Israel), Rafael Advanced Defence Systems Ltd. (Israel), Dassault Aviation SA (France) are ready to invest in India through strategic partnerships.

For boosting manufacturing and export of defence products from India, real time identification and work on the following area is needed; high cost and higher risk projects, high value and low volume products, international collaboration in design and development, high barrier to entry, issues of safety, long service life and criticality in terms of security concerns. The defence export policy at the base level must identify such products, markets and address pressing policy issues towards indigenous sustainable defence led exports.

Source: The Economic Times