FDI in defence: Enough of ideology, let's get on with the business now
India's geostrategic location necessitates a vibrant defence industrial sector but its government has put up a disastrous performance since independence to make the defence sector an efficient and vibrant one.
NDA has rightly followed the previous regime's initiative
The new government at the Centre has rightly pursued the initiative which was taken up by the previous regime. In May last year, the Congress-led United Progressive Alliance (UPA) government took a significant step to improve the pathetic state of the country's defence industry [read this Hindu report]. It sought proposals from eight foreign vendors for over 50 medium transport aircraft to replace the air force's ageing HS 748 Avros fleet, the report said. What was significant is that the government kept the state-owned Hindustan Aeronautics Limited out of the competition. Can the story be told more clearly?
Can
India
afford
to
take
small
steps
towards
a
big
goal?
But
can
India
afford
to
carry
on
with
small
steps
for
reforms
in
its
defence
sector
policies?
India
has
been
talking
about
raising
the
home-made
content
in
its
weapon
system
for
a
long
time.
A
panel
led
by
former
president
APJ
Abdul
Kalam
had
said
in
the
mid-1990s
that
the
aim
was
to
increase
the
indigenous
parts
of
the
weaponry
from
30
to
70
per
cent
by
2005.
Almost
a
decade
has
passed
since
then
and
India
is
still
importing
70
per
cent
of
its
defence
weaponry.
India's defence sector has performed below par
The ordnance and defence public sector units have performed below par and drained the state exchequer, thanks to procrastination and excessive costs. The corruption involved (read VVIP chopper) in the public-foreign partnership has also given rise to more problems.
[Read: Defence scams: Why India continues to depend on foreign deals?]
The country's defense industry has attracted only $4.1 million worth of foreign investment since 2001, when it was first opened to foreign participation in, according to government figures. Industries like services, telecom, and computer software and hardware, on the other hand, have each attracted at least $10 billion in foreign investment between April 2000 and March 2014.
How
long
can
this
go
on?
High
time
we
shed
the
Nehruvian
protectionism
in
defence
sector
It
is
high
time
that
the
defence
sector
is
freed
from
the
Nehruvian
legacy.
If
we
can
prove
our
potentials
before
the
world
in
sector
like
automobiles,
then
why
not
in
defence?
Efficiency
is
what
needed,
even
if
it
is
through
the
private
sector
The move by Jaitley becomes very relevant in this regard. The announcement of raising foreign investment in defence upto 49 per cent (currently it is 26 per cent) will help the Indian firms attract international capital, technology and knowledge. It will also mark a departure from the prevailing practice of buying modern military articles and spend huge foreign exchange in return.
Protectionism has exposed our defence sector, there lies the irony
The task doesn't end with increasing the FDI cap to 49 per cent for the big foreign firms won't be content short of majority stakes in a new market to make financial commitments. Focus will also be required on aspects of technology transfer and local recruitment in the Indian firms engaged in defence procurement and manufacturing. And not to say of the investment environment in India. Indian politics has no shortage of elements who love to create a ruckus and hinder the way for the evolution of a robust foreign investment policy in the country, thanks to their undying commitment towards pseudo-national feelings.
We have come a long way since 1962, haven't the Chinese?
The
defence
minister
in
the
last
government,
AK
Antony,
had
said
on
the
50th
anniversary
of
the
Sino-Indian
war
of
1962
that
India
has
come
a
long
way
since
that
disaster.
Yes,
India
has.
But
how
much
has
been
that
progress
in
comparison
to
that
of
the
Chinese?
The
government
of
Modi
needs
to
come
out
with
answers
fast.