With the COVID-19 pandemic eviscerating the Indian economy, the government recently announced a stimulus which also contains a defence ‘Make in India’ (MII) package. The measures include:
increasing the FDI percentage in defence manufacturing
a negative list for imported weapons
separate budget for Indian-made military equipment
corporatisation of the Ordnance Factory Board (OFB)
reform of defence procurement
The ‘Make in India’ programme is primarily being impelled by the imperative to reduce arms import bills and ‘optimise’ defence expenditure – India’s FY2019 defence budget of USD 71.1 billion was the highest in South Asia and the third-highest in the world, and for the past five years, it has been the world’s second largest arms importer.
‘Make in India’ in Defence Sector: A ‘New’ Idea?
The ‘Make in India’ notion, however, is not new. In 1990, India had called for achieving 70 percent self-reliance in defence. PM Modi, in his first address from the Red Fort (15 August 2014), espoused a ‘Make in India’ package of ‘satellites to submarines’ – the Defence Production Policy of 2018 stipulates that by 2025, India must achieve self-reliance in producing major platforms, as also export arms worth USD 5 billion (FY2016 defence exports: Rs. 1,495 crore). But there are systemic reasons as to why the programme has not witnessed substantial traction, some of which have been already outlined in various publications.
Challenges In Indigenous Defence Manufacturing
One of the elemental stumbling blocks in indigenous defence manufacturing is a failure to understand how a successful Military Industrial Complex (MIC) functions.
Major weapon platforms have a normal service life of about 40-50 years. Therefore, what we manufacture today, must remain combat-relevant in the decades ahead. But with technology advancing at an exponential rate and warfare evolving, many major platforms run the risk of becoming obsolete in just 2-3 decades. Therefore, evolving specifications of weapon systems and munitions requires two separate but interlinked processes, internal and external.
The internal process of the armed forces requires a stepped analysis:
A reasoned assessment of the future security environment and challenges likely to be faced by the nation
Evolution of a national security strategy. This should also indicate threats that could be managed politically/diplomatically, and which would require pure military solution(s)
The armed forces amplify what the nation would want as an integrated response if those threats manifest
Use the mooted response to develop war-fighting strategies
Develop Service-specific General Staff Policy Statement(s)/General Staff Qualitative Requirement(s) for military structures and weapon systems that allow implementation of the stated war-fighting strategies
Dire Need For Close Interaction Between Armed Forces, Scientific Community & ‘MIC’
Externally, there is a need for close interaction/dialogue between the armed forces, the scientific community and the MIC to refine the GSQRs (General Staff Qualitative Requirements), to define the MILSPECs (military standard) for each component, and then develop those weapon systems. This would entail discussions on (i) war-fighting tasks to be executed; (ii) manpower and training capabilities of the client Service; (iii) financial outlays available; (iv) capabilities of the industry; (v) technologies that can be delivered in coming years; and (vi) retrofitting with emergent technologies in the decades ahead.
In the absence of such interaction, particularly with foreign firms, and an environment of ‘everything is classified’ and bland RFPs (Request for Proposals), private defence companies, which at the very least need to break-even on costs, are often asked to manufacture ‘something inspirational’, after which the Armed Forces will ‘choose the best’. This lack of sustained dialogue is evident from just two examples:
MBT Arjun – the Indian Army changed the original QR about four times
the Indian Army’s 2011 RFP for a Multi-Calibre Assault Rifle (MCAR)
What’s Coming in the Way of Military’s Demand for ‘GSQR Standards’ for Weaponry?
Finance Minister Nirmala Sitharaman, while accepting the Indian military’s demand that weaponry must not fall short of GSQR standards, added that “GSQRs would be honoured, but the notified list of items can only be purchased from India.” The fact is that major platforms comprise hundreds of technologies and thousands of components manufactured to MILSPEC standards. A failure of one component can jeopardise an entire mission.
However, we still do not have an entire MIC ecosystem that combines government agencies, R&D, suppliers, component manufacturers, and technology adoption firms that integrate sub-systems into a working whole. This means we may still have to import critical components – which places a question mark on the negative list.
India’s Defence Sector Needs More Spending on R&D
We are importing modern weapons and munitions as they incorporate complex technologies. Technology upgradation can happen in two ways:
transfer of technology
Research & Development is the backbone of innovation and quality manufacturing – both require large R&D investments.
China’s R&D expenditure (USD 275 billion in 2018) is about 2.2 percent of its GDP, that is, more than Japan, Germany and South Korea together. India's spending on R&D has been stagnant at 0.6-0.7 percent of its GDP. Yet, China has only recently mastered single-crystal technology (used in manufacture of jet engine turbine blades) and high-end metallurgy. Hence, a dilemma – we either wait to develop such technologies indigenously or resort to selective imports.
The alternative is ‘transfer of technology’, assimilating those technologies, and then leaping from that threshold.
However, almost all major contracts of the past ten years have been ‘off-the-shelf’, with no transfer of technology (the French ‘Rafale’ fighter, Russian S-400 strategic SAM system, the United States’ Apache and Chinook helicopters, P8i maritime patrol aircraft). And no one gives away technology for cheap – for example, the Rafale is the refined product of about 100 years of R&D effort.
Corporatisation of ‘Ordnance Factory Board’
Units of the OFB and Defence Public Sector Undertakings (DPSUs), with their unions and political patronage, have been resistant to deep reforms, yet preferred over competent private players. Thus, corporatisation may not change much. The answer lies in their privatisation – which is unlikely.
PM Modi had earlier (2014) too mooted raising manufacturing to 25 percent of India’s GDP – but it declined to 14.8 percent by 2018.
The fact is that, unlike China or Vietnam, we haven’t invested enough in infrastructure, R&D, healthcare, education and skill-development to build a relatively educated and disciplined workforce, or an advanced business-cum-manufacturing ecosystem. This severely impinges on indigenous capabilities.
Insofar as foreign firms relocating to India is concerned, they will go where it makes economic sense. And currently, given the economic ravages wrought globally by the pandemic, cash-starved companies are unwilling to abandon existing supply chains and invest in new operations. The March 2020 AmCham China survey of US firms in China found just 4 percent “actively considering moving some or all of their operations abroad”; 55 percent said it’s too soon to tell – and this is before China controlled the epidemic and began reviving its economy.
Overall, with the current phase of ‘Defence Make in India’ being driven by austerity, it does seem that the Armed Forces may be constrained to accept what’s available indigenously. However, the MII efforts, if pursued vigorously, have the potential to allow India to achieve self-sufficiency in the long term.
(Kuldip Singh is a retired Brigadier of the Indian Army. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)