The following report was released by Brookings India on August 8, 2019. The full report can be downloaded here.
An indigenous defence industry is a vital objective for India given its security environment and strategic objectives. India has a large and growing defence budget and a long history of defence industrial production. However, the country remains heavily reliant on defence imports, particularly for major platforms, while its own exports are extremely meagre. Although several high-level committees have been established to address the problem of defence industrial indigenisation, very few of the necessary steps have been taken. In part, this is because India faces a number of dilemmas in trying to reform its defence industry: the normal rules of market economics do not apply; ideal objectives of quality, cost, and timeframes cannot be achieved simultaneously; defence budgets remain susceptible to cuts; the nature of defence supply chains is changing; and little heed has been paid to policies to maximise technological absorption. Moreover, major stakeholders confront their own challenges: India’s powerful defence public sector faces conflicts of interest and is resistant to change; the armed services provide unrealistic qualitative requirements; the Ministry of Defence lacks specialisation; the Finance Ministry discourages long-term spending; and the political leadership lacks expertise and is reluctant to make decisions due to political perceptions. To address these diverse challenges, efforts should be made to ensure predictable long-term requirements and create a more level playing field between the public and private sectors. Further, a mechanism must be found to ensure predictable capital expenditure, in order to incentivise investment. Without such steps being taken, India will continue to struggle in its quest for defence indigenisation.
Read the full report here.