India was the world’s second largest importer of major arms in 2014–18 and accounted for 9.5% of the global total according to an estimate by Stockholm International Peace Research Institute (SIPRI). This is an anomaly for a $3 trillion economy. It compromises strategic autonomy and crimps the war fighting ability.
The Modi government has sought to correct this anomaly through a series of policy initiatives to push the ‘Make in India’ defence category. However like a tank struck in the sands of the Thar Desert the reverse throttles are kicking up a lot of noise and dust but the tank is hardly moving an inch forward.
The maze
The first difficulty that ‘Make in India’ faces is the formidable Indian bureaucracy. The defence ministry is not willing to cooperate and that has made the whole thing come unstuck. Years are lost as policies are changed and goal posts shifted. In the past five years the defence procurement policy has seen three major and several minor changes. These changes upset the calculation and project management capabilities of the Indian private sector players keen on a defence play. They also unnerve foreign vendors who are not sure which rules to play by before committing to major investments in India.
The offset clause that mandates the spending of a part of Indian money given as payout for defence contracts has a major contradiction. While the policy in theory allows the company that has the contract to have an offset partner of his choice – the government has the right to veto any partner and also all offset partners are to be cleared by the Ministry of Defence. Thus, the actual room for the company that is awarding the offset contract is pretty much limited. This has meant delays in awarding contracts as companies do not like to part with defence contracts without having full say in such decisions.
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