Can Make In India Reduce Imports In Defence?

In a bid to boost defence manufacturing, the government of India through it’s 'Make in India' initiative has set a target to manufacture 70 per cent of defence related products domestically to reduce import bills. Currently, only 30 per cent of the total equipment is manufactured indigenously and the rest are imported.  The defence services of the country account for nearly Rs 2.29 lakh crore of the Central Government Budget which is 2.5 per cent of the GDP and 13 per cent of the Central Government expenditure. The defence manufacturing sector of the country has witnessed insignificant development since independence, leaving no choice for the government except importing to strengthen its ammunition. Baba Kalyani, MD of Kalyani Group says that over the last one decade, India has developed into a major investment zone for foreign manufacturers. “Policy like Make of India continues to mammoth investments in the country’s manufacturing sector. A proper participation of the private sector with global companies will increase capabilities of domestic defence companies.” The Kalyani Group formed a joint venture with Israel’s Rafael Advanced Defence Systems to develop aerospace and defence products in February this year. Trade pundits believe that the ‘Make in India’ initiative will bring fresh rays of hope in the indigenous manufacturing sector. Prime Minister Modi’s thrust to increase the share of manufacturing from the current level of 15 per cent of Gross Domestic Product (GDP) to 25 per cent by the year 2022 and create employment opportunity for ten million people per year will only be possible if his pet project is successful in bringing more Pvt players and global investment in the country. Currently, the $2 trillion economy is expected to become a $5 trillion economy by the year 2025. Participation of private companies in defence was restricted till 2001. Since the private sector was allowed to invest in defence, the sector has garnered attention of big players. Of late, Reliance, Tata, Mahindra are among other big players showing interest in investing in the sector. Anil Ambani’s Reliance Aerostructure Ltd (RAL) will set up the 6,500 crore unit in Multimodal International Hub Airport at Nagpur (MIHAN) under the PM's pet project Make in India. Tata and Mahindra, two companies which have shown interest to invest in the sector have been given permits to manufacture naval systems like torpedoes, sea mines and boats. Beside that, Tatas have been given right to upgrade major fighting units like the T 90 and T 72 tanks of the Indian Army. The only thing which concerns the development of defence industry in the country is the inadequate funding in R&D. KD Nayak, director- R&D of DRDO says, “Amount invested in R&D in India is very low when compared to developed countries. DRDO receives only six per cent of the total defence expenditure when ideally it should have been ten. Not just government but the private sector in the country also invests very less in R&D.” The overall allocation to R&D is 0.85 per cent in India compared to western countries which spend in the range of 2.2 per cent to 3.5 per cent.