India is the second-largest importer of arms and has the fifth-largest defense budget in the world. Even after Seventy years of independence, India is still importing a major portion of its defense equipment from foreign countries for its second-largest Armed forces. But in recent times, the Government of India has announced a slew of reforms in India’s Defense Industry to cut its imports from foreign and make India achieve self-reliance in defense production. India now aims to become a leading producer of defense equipment and to list himself as one of the major exporters of defense equipment. As per the latest figures available, India achieved major growth in defense export as it jumped by 700% in just two years, from $215 Million in the Fiscal Year 2016-17 to $1.5billion in FY2018-19, and the Indian government under PM Modi set a target of achieving defense export worth Rupees 35000 Crore in next four years.
To Achieve this target and to become a self-reliant in defense production a number of reforms in India’s Defence Industry announced by the GOI. In this article, we will go through these recently announced reforms-
- DEFENCE PROCUREMENT POLICY 2020– The defense procurement policy 2020 was unveiled by MOD. The policy aims to push India towards more indigenous content in the defense equipment by 50%.DPP Encouraged initiatives of local material as a part of make in India.
- On 16th May 2020 Finance Minister Nirmala Sitharaman Announced various measures like-
- Raising of Foreign Direct Investment from the existing 49% to 74% through the automatic route, but recently the government has added a security clause in 74% FDI through automatic approval. This is one of the most important announcements as it could help in attracting foreign funds and the transfer of technology.
- GOI issued a negative list of defense equipment for the import. this negative list of 101 defense items which includes various items like radars, Unmanned aerial vehicles, artillery, missile destroyers, and many more, will help in boosting domestic participation in the defense sector.
- The Negative Import list is to be updated yearly in consultation with the department of military affairs. this is going to provide a major boost for the participation of MSME’S in defense production.
- A separate capital budget will be allocated for the procurement of the indigenous weapon system. This provision of a separate budget for domestic defense procurement will provide a boost to the domestic manufacturing industry. An outlay of Rupees 52000 crore has been created for domestic capital procurement in the current fiscal year.
- Corporatization of Ordinance Factory Boards. to improve the efficiency and transparency of OFB’S government has decided to corporatize the OFB’S. the Government has clarified that they are not going to privatize the OFB’S but it would be listed on the stock market to improve its transparency.
- General Staff requirements(GSQR) or technical requirements that are provided by Armed forces will be designed in a way that the local industry will be able to manufacture defense equipment. FM has announced to institute a mechanism that will ensure time-bound defense procurement.
These Major reforms announced by GOI will surely provide a tremendous boost to the indigenous defense industry if these measures are implemented in the right way. These reforms are considered as most important for India to achieve self-reliance in defense manufacturing. These measures will help India to create a domestic ecosystem to boost its domestic defense manufacturing capabilities.