MAKE IN INDIA: MAXIMISING THE DIVIDENDS
Editor’s Note
The Ministry of Defence has shed its image of being an organization that was infamous for cancelling RFIs and blacklisting companies. It has embarked on a process that holds out the hope of force modernization. The long pending demands of the armed forces are being addressed. But, as we switch gears, there is the necessity to ensure that at the core of the endeavour is the objective of self-sufficiency. Undoubtedly, cent percent indigenisation is no professional’s mirage. However, we have to ensure that the billion plus dollars that we spend, gives our forces the teeth and our defence industry the capability and competence to be globally competitive both technologically and costs wise. The author, in his article, attempts to navigate through the maze to an institutionalized acceptance of a policy that rests on the marriage of our public sector’s experience with the private sector’s pace.
MAKE IN INDIA: MAXIMISING THE DIVIDENDS
A great opportunity awaits the Indian defence industry, brought about by path breaking changes in the policies, processes, and a huge outlay for defence modernisation. It has also opened up the avenues for technology absorption and upgradation with Indian companies working with foreign Original Equipment Manufacturers (OEM). Major arms manufacturing nations are wooing India. The Americans have declared that ‘Delhi, Washington are friends with benefits’for both. The US concept of ‘Pivot to Asia’ includes Indo- US cooperation, as a critical component. Russians are talking about “…old friends and our time tested strategic partnership… wherein we can ‘jointly seek ways to address potential threats’. The European nations including France, UK, Germany, Italy, Sweden, are all ready and vying with each other to upgrade their economic interactions with India. Even China, sensing the popular mood, has started selling the idea of , “Dragon and Elephant can dance together”. These are indicators of India becoming the focus of economic interests in our contemporary geo-political environment.
The fundamentals of the current strategic pulls were always there. India remains one of the fastest growing economies with a large emerging market and incremental purchasing power of its populace. It’s also among the largest arms importers, an IT giant with abundant educated and skilled manpower, and not to forget the hub of spiritual enlightenment in a turbulent materialistic world.
It’s the economy driven surge at large that’s driving countries to woo India creating opportunities in abundance for us to exploit. In this new phase of India shinning, it is the policy shift by the present political dispensation which has brought in a paradigm shift by way of pragmatic approach to achieve a long term vision to enhance national power in all its manifestations. The political leadership has reset and repositioned the national priorities to exploit the leverages by realigning the contemporary politico-economic synergies, and also ensuring appropriate geo political balance for our strategic political independence. While it is well appreciated that what is happening today has been facilitated by efforts of yesteryears, it is the vision and courage of present leadership which has opened the gates for opportunities so long apparently difficult to garner.
Image Courtesy: The Economic Times
Make in India is the conceptual model of harnessing and leveraging untapped capabilities of Indian industry and enterprises of talented professionals for achieving envisaged national objective of maximising self sufficiency in essential. The scope of the policy has a focus on encouraging private enterprise that has tremendous talent amply proven in the earlier phase of India shinning wherein the Indian economy graduated from regional to international domain, albeit at lower technological thresholds. Now we intend to further upgrade our capabilities to the high-tech domain and enter the league of reckonable global industrial powers.
In this industrial matrix, the public sector would continue to provide core industrial inputs alongside selected private industries as competitors and collaborators, thereby enhancing the quality of the product and services. There are also indications of inclusiveness of private sector in selected strategic areas which were the exclusive domain of the public sector due to security sensitivities often encountered in the military domain.
Given our dependence on imports for almost 70 percent of our military hardware, it is essential to build our military industrial base so as to minimise dependence on outsiders. Consequentially, Make in India policy needs to accord high priority to the defence sector because of its significant influence on our strategic autonomy. Going by the statistics so far, there has not been requisite inflow of FDI in the defence sector, except announcements of few joint ventures between global OEMs and Indian public as well as private industrial houses. While there is tremendous enthusiasm amongst small entrepreneurs, they do not have requisite finances, technology, and assured markets for sustenance of their businesses. Though the new policy frame work has rolled out some incentives for supporting R&D efforts, these seem impractical as there is no surety of acceptance of the product given the intricacies of procurement procedures.
In the Indian context, the private sector has so far been mostly kept away from the defence manufacturing activities due to security reasons, and hence have limited experience. It is also a fact that manufacture and marketing of defence products is a different process altogether as compared to the line of business of private sector. The public sector units have reasonable experience in this field. Besides defence PSUs, there are public sector engineering giants who have capabilities to most of the requirements of the armed forces. Some of the private companies vying to be nominated as strategic partners may be dealing with certain categories of defence equipment for the first time and it is quite possible that they would have no choice except to fall in line with their foreign partners; a situation which can be exploited by the OEMs. While the parameters of these joint ventures are unknown, it appears that few of these Indian companies may well become back stage managerial partners of the OEMs who would merely assemble the equipment in India and the Indian counterparts may not benefit adequately from transfer of core technologies through offset obligations or otherwise. Moreover, there may be requirement of creating infrastructure, hiring skilled manpower and their training to start the new enterprise which would impose time delays and investments impacting on costs of end products.
Image Courtesy: Hindustan Aeronautics Limited
In consequence, it may be worth trying to club selected public sector engineering companies along with the nominated private sector enterprises as strategic partners for joint ventures with the foreign OEMs. Individually our private sector entities may be structurally wanting to handle the transformation. It would optimize capabilities of public as well as private sectors as regards infrastructure, engineering support, skilled manpower, finances, market dynamics, managerial interface and stability of the enterprise. Similarly, the small enterprises may be incorporated as ancillaries to provide product support. Such association does appear a little difficult given the cultural differential of public and private sectors, however, both being national resources need to be synergized for optimizing results. Knowing the cut throat competition in the arms industry and associated friction areas, such alignments would pay dividends in the long run.
Public sector companies who have some experience in manufacturing military hardware can act as firm bases for private sector partners who can then enhance the national efforts by bringing in higher efficiency. Such collaboration will also to an extent mitigate the likely attempts by the private sector to poach trained and skilled manpower of the public sector enterprises. It also takes care of concerns of foreign countries since the Indian Government would be one of the stake holders.
Manufacturing of high technology, sensitive big ticket strategic equipment certainly needs government interface in the Indian context, wherein public sector companies along with private partners would be a better bet than leaving it purely to the private enterprise. Besides this, private companies, both big and small, who do not have adequate experience in defence manufacturing need to be given an anchor so as to facilitate their smooth and sustained growth.
The opportunities are certainly knocking but we need to exploit them with a pragmatic approach lest they remain opportunities for foreigners at our cost.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of BharatShakti.in)
