Indian Economy Examining the shift to selfreliance

“ The thought of autonomy is of import even today. However, autonomy does non connote prosecuting a policy of autarchy. It does non intend cutting ourselves off from the universe. Autonomy in the modern universe implies the ability to prosecute one ‘s involvements with assurance and religion in one ‘s ain capablenesss. We do non hold to prosecute autonomy by making everything ourselves. We can, so, prosecute greater autonomy by making inter-relationships of inter-dependence that heighten our dickering power. Greater interaction with the universe can in fact heighten a state ‘s autonomy by making a web of reciprocally good inter-relationships. ” – Dr Manmohan Singh

“ Buy Indian and Make Indian is traveling to be the major constituent of our procurance policy. That will assist us to hold a strong defense mechanism industrial base in India. ” -A.K. Antony, Defence Minister


1. The blooming Indian economic system is fast pacing into the twenty-first century with the potency of being an economic world power. Spurred by economic reforms and the impact of liberalization, denationalization and globalization, India, is genuinely on the brink of carving its ain niche in the universe.

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2. An economic world power must besides be a military super power, in footings of Military capableness and strength. There should besides be a reliable and dependable autochthonal defense mechanism industrial base. A state which is self reliant and independent in its military demands, and therefore, besides has entree to technologically advanced capableness can genuinely be termed as military world power. The constitution of a well developed defense mechanism industrial base is of primary importance to any emerging ace power. Focus should be on capableness development followed by numerical growing, non the other manner unit of ammunition. A clear apprehension and designation of the demands and demands of the armed forces and guaranting that the demands are met within the stipulated clip, in a cost effectual mode, should be the primary end of any defense mechanism industrial base and the determiner of its success.

India ‘s Defence Industrial Base. A Historical position

3. Pre Independence. The pre-independence defence-industrial substructure in India consisted of 18 Ordnance Factories ( OFs )[ 3 ], by and large providing to mend and pass every bit good as to supplement arms and equipment produced in Britain. During this period India was ne’er allowed to develop nucleus competences in industrial production.

4. Post Independence. Since independency the Indian leading aimed at achieving autonomy in full sphere of defense mechanism production and to accomplish this India ‘s industrial policies[ 4 ]emphasized ‘core ‘ industries ( including defense mechanism sector ) to be taken attention of by the cardinal authorities and others by the provinces. As a consequence eight Defence Public Sector Units ( DPSUs ) under sole control of the authorities were devoted to production of different military systems and constituents. Defence Science Organisation ( DSO ) was established at that clip to take up challenges of set abouting R & A ; D activities. DRDO was formed in 1958 from the merger of the so already working developmental constitutions with the DSO. DRDO so comprised of 10 constitutions or research labs which has now grown into a web of over 50 research labs throughout India[ 5 ].

5. Post 1962 war License production, direct purchase and acquisitions remained the prevailing signifier of supply for the Indian defense mechanism forces. This resulted in a spread of about three decennaries in India ‘s attempt toward autochthonal production which was particularly apparent in the Fieldss of design and development, which constitutes the upper spectrum of self trust. A combatant aircraft between Marut and the Light Combat Aircraft ( LCA ) , a basic trainer aircraft between HT-2 and HPT- 32, an intermediate trainer between Kiran and an yet-to-be to the full developed Advanced Jet Trainer ( AJT ) are some of the illustrations that typify both the engineering and production spreads[ 6 ].

6. Tendencies in 1980s and 1990s. This was the period when Cold War came to an terminal and Global defense mechanism outgo rose to an all clip high in 1987 and so fell aggressively during the late eightiess and early 1990s. Besides, there was a rise in low strength struggles lawlessness, offenses and terrorist act was distributing manifold. This was besides the clip states were opening up their economic systems and the globalisation epoch commenced. This period was the starting point of major defense mechanism acquisitions from abroad coupled with major enterprises in autochthonal defense mechanism production, including R & A ; D activities. The license production of Jaguars and MiG- 27M was undertaken by HAL[ 7 ]. Besides autochthonal development of Light Combat Aircraft ( LCA ) , Advanced Light Helicopter ( ALH ) and Main Battle Tank ( MBT ) Arjun were speeded up by DRDO. Production of missiles developed under Integrated Guided Missile Development Programme ( IGMDP ) , through Bharat Dynamics Limited ( BDL ) commenced. Hence, during this period India had been able to originate a figure of undertakings for autochthonal development. However, fructification of these undertakings was accompanied by inordinate holds and technological spreads.

7. The pillar of armed forces was met through significant weaponries acquisition from abroad chiefly due to decelerate advancement in our autochthonal design and development activities as besides the inability to maintain gait with the planetary state-of-art engineerings in the defense mechanism industry. With the alteration in environment after atomic detonations by India and Pakistan and the Kargil struggle, the state had to give a re-look to its defense mechanism scheme including its aim of accomplishing autonomy in defense mechanism industry.

8. Defense mechanism Industry in twenty-first Century Soon after the liberalisation of the economic system, the defense mechanism industry started recognizing the importance of civil military interaction in the industrial sector to achieve ‘near autonomy ‘ . Coupled with alterations at institutional and organisational degrees as recommended by the Group of Ministers Committee Report on ‘Reforming the National Security System ‘ , is the most of import policy displacement in the defence-industrial sector leting 100 % private sector engagement and 26 % by Foreign Direct Investment ( FDI )[ 8 ]. Alliance of Indian Industries ( CII ) has been instrumental in act uponing such a pronounced alteration in policy. While these far-reaching institutional and policy-oriented alterations have been underway for rather some clip, the demand for private engagement has assumed significance in recent old ages.

Tendencies in Global Defence Industry

9. The planetary defense mechanism industry has undergone profound alterations in recent old ages. The monolithic armed forces physique up by many states during the Cold War epoch fuelled greater demand for military arms and systems. However, immediate station Cold War period witnessed the contrary tendency in demand for military arms and systems ensuing in decrease in budgetary allotment in the defense mechanism sector. This resulted in many smaller companies either to unify with large 1s or to switch their precedences towards civilian production, therefore go forthing the defense mechanism sector. Amalgamations and acquisitions during this period resulted in creative activity of a few elephantine companies like Boeing, Lockheed Martin, British Aerospace, Northrop Grumman, EADS and others. The military outgo once more witnessed upward tendency since 1999 and this is likely to go on in future[ 9 ]. As procurement budgets have started to swell once more and are likely to remain that manner, new chances are expected for the defense mechanism industry. In the altering struggle scenario, there has been an upward tendency in the LIC, insurgence, terrorist act, OOAC etc as a consequence of which the planetary defense mechanism industry after a period of important retrenchment and rationalisation has entered into a stage of renewed attending.

India ‘s Defence Industry.

10. Post Cold War epoch, the altering tendencies in the planetary defense mechanism industry had affected Indian defense mechanism industry in many ways. The epoch of economic liberalisation since 1991 has resulted in autochthonal build-up of technological base in the IT, communicating, electronics, car sectors etc. Since, all acquisitions in the past and till upto mid 90 ‘s were either straight-out purchase or linked with license production, what best the DPSUs or the OFs could derive was expertness in production which was wholly dependent on the assemblies and Semi strike hard Down Kits ( SKD ) or sub assemblies imported from the Original equipment maker ( OEM ) . The existent engineering transportation aimed at heightening the autochthonal development was losing in all the trades covered under License Production and Transfer of Technology ( TOT ) . However, the most far making alteration that has impacted the India ‘s defense mechanism industrial sector is the opening up of this sector for private engagement. The aims are multiplex viz. , decrease of defense mechanism imports from current degrees of 70 per centum, addition in defense mechanism exports, heighten the autochthonal R & A ; D skill degree and substructure to bring forth technologically advanced province of the art equipment within the clip frames specified. Coupled with the economic liberalisation and opening up of the defense mechanism sector to private companies was linked the job of licensing and demand of foreign direct investing in the defense mechanism sector. In January 2001, the GOI initiated a series of major enterprises that included Foreign Direct Investment ( FDI ) up to about 26 per centum and full private engagement in certain sectors in the defense mechanism industry.

Shift from Self Sufficiency to Autonomy

11. Since independency the India ‘s industrial policies outlined in Industry Policy Resolution of 1948 and 1951 was aimed at accomplishing self sufficiency in defense mechanism production. Towards this the authorities invested to a great extent in scientific and technological establishments both educational-such as the IITs, and research and development institutes such as the CSIR, ICAR, DAE, DoS, ICMR, DRDO so as to develop a strong technological base. However, the state ‘s defense mechanism was neglected, as was apparent in 1962 war. With a weak Defence-Industrial Base ( DIB ) , the policies to maximise production in order to achieve autonomy in the defense mechanism sector although were considered farsighted, did non fit outlooks, therefore taking to switch of focal point from autonomy theoretical account to self trust theoretical account station 1962 war.

12. Autonomy in its true sense does non prevent accessing external beginnings for engineering and systems, or external aid in any phase of the production rhythm. Hence, autonomy every bit far as India was concerned, meant – apart from India ‘s ain production base for support – a grade of dependance on dependable foreign beginnings for entree to engineerings, supply of constituents and complete systems was desirable. These were materialized by run intoing pressing and immediate demands through imports form abroad while at the same time endeavoring for autochthonal capablenesss in defense mechanism production. Although India ‘s chief focal point on imports was from western states like UK, France, Sweden these states were loath in providing defense mechanism equipment to India station 1962 war with China. India ‘s quest for self trust got a major encouragement when Russia ( former USSR ) agreed to Licence production by India for assorted defense mechanism equipment acquired by India signifier Russia. These Licence production of aircraft, conflict armored combat vehicle, weaponries and ammo were undertaken by assorted DPSUs every bit good as OFs. However, the lone thing that lost its focal point in the deal was the transportation of engineering aimed at heightening autochthonal production and R & A ; D activities. The result of this is obvious, as witnessed in the LCA plan, MBT Arjun, aero engine Kaveri to call a few. In malice of holding produced aircraft, armored combat vehicles and aero engines under licence production the organisations involved in the production could barely absorb and foster the engineering needed to supplement our ain autochthonal attempts. Probably the focal point of these organisations was more towards production instead than indigenization.

Defence Industrial Policy

13. The defense mechanism industrial policy was aimed at set uping a strong and self sufficient defense mechanism industrial base ( DIB ) . The aim was to hold push in autochthonal production and researching possibilities of exports to other developing states that may look frontward to supplies from India.

14. In malice of being more focussed to numerical growing or production than on the capableness development ( R & A ; D ) , India has made rapid paces in defense mechanism engineering in recent yesteryear and reached a phase of some degree of autonomy. The bing potency of the state in defense mechanism production, in the signifier of resource capableness, know-how and proficient expertness, could non be exploited to its full due to miss of clear cut defense mechanism policy. However, since liberalisation of the economic system in 1991 there has been increased civil military interaction. The alterations in the defense mechanism production policy indicates the purpose to affect the private sector in defense mechanism R & A ; D and production through licensing and indirect gap of the defense mechanism industrial sector to foreign companies through FDI and the beginning agreement. Our defense mechanism industrial policy[ 10 ]since independency loosely consists of the followers: –

Maximization of autochthonal production.

Licence production of those equipments which are available and can be obtained from abroad.

Direct procurance of those equipments non covered above, but considered indispensable for guaranting the security.

Indigeneous Production

15. To advance autochthonal production 8 DPSUs and 40 OFs were established. Besides DRDO comprising of a web of 50 labs was formed to set about R & A ; D in the field of defense mechanism arms, systems and equipment.

Munition mills. At the terminal of the WW2 India ‘s defense mechanism industrial capacity amounted to 18 munition mills, a vesture constitution, and an aircraft production works ; and the new authorities later inherited this capableness. Post independency this continued boulder clay 1958 after which the munition mills were steadily expanded. The war against China in 1962 prompted a farther enlargement in India ‘s munition capableness and today the state has 39 munition mills. They were built to run into the turning demands of India ‘s armed forces over the past 60 years.The Indian Ordnance Factories Organisation ( OFO ) is presently the largest departmentally run industrial project in the state. The 39 OFs are authorities units bring forthing armaments under five classs[ 11 ]:

Ammunition and explosives


Vehicles and equipment

Armored vehicles and

Munition equipment ( other military supplies, including general shops ) .

Defence Public Sector Undertakings. The eight defense mechanism populace sector projects ( DPSUs ) are public-sector corporations managed by the Indian authorities. The defense mechanism PSUs produces a scope of defense mechanism equipment. They besides provide inspection and repair and care installations. They are:

Bharat Dynamics Ltd. BDLA was established in the twelvemonth 1970 to be a fabrication base for guided arm systems[ 12 ].A A

Bharat Earth Movers Ltd. BEML is one of the largest makers and providers of earthmoving, building and excavation equipment in Asia[ 13 ].A

Bharat Electronics Ltd. ( BEL ) was established in 1954 to run into the specialized electronic demands of the Indian defense mechanism services[ 14 ].

Hindustan Aeronautics Ltd. HAL is a major participant in the planetary air power sphere. It has built up comprehensive accomplishments in design, industry and inspection and repair of combatants, trainers, choppers, conveyance aircraft, engines, avionics and system equipment[ 15 ].A

Garden Reach Shipbuilders and Engineers Ltd. ( GRSE ) is one ofA India ‘s leadingA shipyards that physiques and mend a broad scope of vass fromA warshipsA for theA Indian NavyA toA merchandiser shippingA vass[ 16 ].

Goa Shipyard Ltd. GSL is a shipyard that is one of the most sophisticated ship builders in the Country. For over four decennaries, GSL has designed, built and commissioned a broad scope of sophisticated vass for varied applications in the defense mechanism and commercial sectors with particular expertness in edifice modern patrol vass of Steel and Aluminium hull construction[ 17 ].

Mazagon Dock Ltd. Mazagon Dock Limited is the India ‘s premier shipyard building war vessels every bit good as offshore platforms. It undertakes ship edifice, ship fixs and fiction of seaward constructions with installations situated at Mumbai and Nhava[ 18 ].

Mishra Dhatu Nigam Ltd. MIDHANI caters to domestic and international clients with modern metallurgical installations and high grade of proficient competency for fabricating its diverse merchandise mix of superalloys, Ti metals, particular intent steels, electrical opposition & A ; softmagnetic metals, molybedenum and other metals run intoing the stringent demands of the strategic sectors like defense mechanism, aerospace, power and general technology etc[ 19 ].A

Defence Research & A ; Development Organisation ( DRDO ) . India besides has a defense mechanism research and development ( R & A ; D ) capableness. Called DRDO. DRDO draws on the work of 51 laboratories/establishments across the state, and ( in theory at least ) has close links with the eight PSUs. It besides co-operates with 70 academic research establishments, 50 national scientific discipline and engineering Centres, and some companies in the private sector.

License Production

16. Post independency India ‘s quest for autonomy got a major encouragement through license production agreement with USSR. This vastly benefited defense mechanism industry as it improved many noteworthy arms systems from this experience. India ‘s autonomy theoretical account in defense mechanism production was thought to hold given a life rental by the Soviets. The normal premise is that production under licence would enable the state non merely to get the capableness to bring forth a peculiar equipment or merchandise but besides help it derive the proficient know-how for subsequent upgradation and farther technological inventions. For the last fifty-odd old ages, India has been bring forthing a figure of defense mechanism equipment under licence. Good illustrations in this respect are the Vijayanta armored combat vehicle and the MIG series of combatant aircraft[ 20 ]. But this does non look to hold helped in the development of the Arjun Main Battle Tank and the Light Combat Aircraft. Furthermore, India has non even been able to upgradeA certain combatant aircraft held and operated for a long clip by its armed forces.

Direct procurance

17. To run into the immediate demand of the armed forces, straight-out purchase of the systems/ equipment is resorted to. This may be from abroad or for autochthonal companies. The aim of the defense mechanism policy purposes at maximising autochthonal production ; what could non be produced indigenously should be produced under licence agreement ; and those that could non be obtained through these two paths should be acquired by direct purchase.

Emerging Defence Production Policies in 21st Centruy

Transparency in Defence Procurement

18. Since independency and about till late 90 ‘s merely a choice few companies got the Request for Proposals ( RFPs ) with secretiveness being maintained in the procurance procedure. With the debut of Defence Procurement Procedure ( DPP ) the authorities has strengthened its committedness to transparence in the procurance procedure and to taking the “ head covering of secretiveness ” environing it. The instance in point is the procurance of MMRCA. The trades of recent times are unfastened trades with no more head coverings of secretiveness in the RFP. The inside informations of the RFP are made available to all industry representatives by puting the stamps on the net, except in the most sensitive instances, which may be small letter in figure. Guaranting transparence in the procurance procedure has besides resulted in widening the seller base.

Defence Procurement Procedure

19. Defence Procurement Procedure – 2008 is soon being followed. This was issued after DP-2006 was revised along with the Fast Track Procedure – 2001 and the Procedure for Indigenous Warship Building. In add-on, most significantly, a process for the development of systems based on autochthonal research and design, categorized as ‘MAKE ‘ , has now been formulated. This bridges a critical spread that existed hitherto, and would supply the needed model for increased engagement of Indian industry in the defense mechanism sector.A Some of the of import characteristics of Defence Procurement Procedure includes:

Reducing the timeframe for acquisitions.

Enhanced transparence by puting the generic demands of the Services on MOD web site and bring forthing seller enrollment through Internet.

Increased transparence in the behavior of field tests.

‘Integrity Pact ‘ made compulsory for all contracts above Rs. 100 crores.

An ‘Offset ‘ duty of 30 % for all contracts above Rs. 300 crores. However, there have been indicants of companies seeking to thin this clause.

FDI in Defence Production

20. To hike up the autochthonal production in the defense mechanism sector, the authorities in 2001 had opened up the defense mechanism sector by allowing 100 percent private engagement in defense mechanism production and besides 26 percent Foreign Direct Investment of the host company ‘s equity. However, the lone bug in the whole procedure was the demand of obtaining a licence from the defense mechanism ministry by the private houses to bring forth military hardware. However, there is a demand to increase FDI bound from the current 26 per cent which would ease entree to want niche engineering and procedures.

De licensing of Defence Production

21. DPP-2008 did off with the licence demand for industries for fabricating military hardware, thereby making a “ flat playing field ” with the defense mechanism public sector projects. Considered to be a radical DPP, the de licensing will enable the private industries to skilfully use the available expertness to take up production of military hardware. This will decidedly hike up the attempts of indigenization in defense mechanism engineering.

Raksha Udyog Ratnas

22. Effective engagement by the Industry, both public and private, at assorted points of interaction and subsequent long-run association in merchandise development and productionisation, can be merely done through those houses of proved excellence and which are capable of lending, depending on their proficient, managerial and fiscal strength. These houses called as Raksha Udyog Ratnas ( RUR ) would be the cardinal drivers towards raising autochthonal defense mechanism technological base and world-class fabrication capablenesss in India.

R & A ; D in Military Aviation Sector

23. Aviation is one of the most important technological influences of our clip and empowers the state with strength. It is a major tool for economic development and has a important function in National security andA internationalA dealingss.

24. Assorted military, DPSUs and private companies have been associated in the R & A ; D activities, package and systems development and systems integrating on civil, combatant aircraft and choppers. These are Defence Avionics Research Establishment ( DARE ) , Aeronautical Development Agency ( ADA ) , Aeronautical Development Establishment ( ADE ) , Aircraft Upgrade Research and Development Centre ( AURDC ) , HAL, Mission Computing System Research and Development Centre ( MCSRDC ) HAL, and Software Development Institute ( SDI ) . DARE played a polar function in germinating the avionics architecture of Mig 27 ascent, developed the Core Avionics Computer ( CAC ) , mission computing machine package for CAC, show suite package of SU 30 MKI and the hardware and operating system of Radar Computer of SU 30 MKI. SDI based at Bangalore has been actively involved in the autochthonal ascents of SU 30 MKI every bit good as development of assorted mission be aftering systems and arm algorithms employed in Mig 27 ascent. AURDC has been involved in the Bison ascent, Mig 27 ascent and assorted autochthonal ascents of SU 30 MKI aircraft. MCSRDC has played a critical function in the package development and integrating of avionics systems in the Jaguar ( Darin II ) aircraft. It is besides involved in the ascent of Jaguar to Darin III criterions.

Joint Ventures

25. India has an built-in border over several other states because of higher accomplishments and lower costs of production. This makes India an ideal rival for joint ventures. HAL has entered into joint ventures with many abroad air power system companies to set about design and development of new systems in India. Some of these are the BaeHAL, HAL Edgewood, HELBIT etc. Many other package and hardware giants involved in the air power hardware and package development particularly in the embedded and existent clip system sphere have besides established their installations in Bangalore. Some of these are GE Intelligent Systems, Honeywell, etc.

26. Given their rapid growing over the last decennary, it is possibly no surprise that Indian package companies such as HCL, Infosys, Infotech, Tata Consultancy Services and Wipro have been active in the aerospace industry for several old ages. Increasingly, they are profiting from the technology services outsourcing programmes. This will assist India evolve from IT and low-end concern procedure outsourcing work to high-end design services. Abroad companies view the Indian companies as “ long-run spouses and non as mere suppliers/vendors ” .

Private Engagement

27. EADS ‘s chopper subordinate Eurocopter has had one of the longest partnerships with Indian industry. Since 1962, it has worked with HAL in India to fabricate more than 600 Alouette 3 and Lama ( known as Cheetah and Chetak locally ) choppers. HAL besides produces airframes for the Ecureuil/Fennec household of rotorcraft. The European house besides plans to put up pilot preparation installations in India for the civil and military sections and programs to put a‚¬7-8 billion ( $ 9.5-11 billion ) over the following 10 old ages. Tata has entered into JV with AgustaWestland to piece the AW119 in India.

28. Honeywell Aerospace, which provides incorporate avionics, engines, systems and service merchandises for the aerospace industry, is one illustration. The US company has a design and development Centre in India that it hopes to spread out in the coming old ages. Airbus has set up the Airbus Engineering Centre India in Bangalore where local applied scientists help develop capablenesss in modeling and simulation, covering countries such as flight direction systems and aeromechanicss, to assist in the design and production of aircraft such as the A380 and the A350. It is besides working with Indian IT houses such as CADES, HCL, Infosys, Quest and Satyam to offer support across assorted aircraft programmes.


29. India ‘s defence-industrial scheme is directed chiefly toward accomplishing autonomy. Soon, there is a clear instability in demands by the armed forces. While approximately 70 per centum of demands are met through weaponries imports, the domestic beginnings supply the remainder. The current scheme is geared to change by reversal this tendency with the primary purpose of providing three-fourth of the demands through domestic beginnings. India ‘s determination to let private engagement in the defence-industrial sector is seen as a double purpose, viz. to accomplish much-needed capital and production sweetening and, secondly, to open up to the external market through their presence. There is besides an attempt to follow suited schemes to do choice sectors like aerospace and electronics globally competitory. DPSUs like HAL and BEL are now much in demand and are seeking to go feasible planetary giants.

30. The overall scheme is to do the defence-industrial sector act as a engine for economic development. In this respect, an accent on dual-use engineerings and production is contemplated which could profit both the defense mechanism and civilian sector. The current scheme besides looks into assorted options toward understating the province investings in the defense mechanism sector while promoting private and foreign portfolio investing in bing Indian defense mechanism companies. If recent alterations in assorted policies related to the defense mechanism industry are supposed to hold any significance, so, despite all jobs, there is something to be optimistic about in the Indian defense mechanism industry.


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