Glass half full

India ranks amongst the top 10 military buyer in the world, making it one of the most attractive markets for defence.

Meanwhile, India’s government aims to reduce import dependence in defence by about 35 percent. It is actively promoting indigenous defence manufacturing with initiatives like ‘Make in India’ and policy reforms including allowing 100 percent Foreign Direct Investment.

Following the Central government’s footsteps and recognising the potential of the defence sector, several states have begun offering incentives and concessions in the form of aerospace clusters or Special Economic Zones to develop an ecosystem where core and ancillary activities related to defence manufacturing can co-exist.

With the Defence Minister’s intention of procuring about US$10 billion worth of defence products per year in the next 5 to 10 years, and the government undertaking several initiatives and reforms, there are plenty of opportunities.

As a result, we can see how OEMs and SMEs in the defence manufacturing sector are focussed on moving from a buyer-seller to a co-developer and co-manufacturer relationship. They form strategic partnerships to support the development of a sustainable supplier base for the defence sector.

Steps to success

While the Government’s initiatives offer tremendous opportunities, to achieve a sustainable self-reliance, a robust ecosystem that can address the capacity and capability required for the industry must be created through short and long term initiatives.

Here are some steps that could enable long term indigenisation:

• Partnering for success: Co-development and co-manufacturing is the way forward to achieve the vision of turning India into a global high value manufacturing destination.
  India has potential that can be tapped into by way of key strategic partnerships that add value across the entire length and breadth of R&D, manufacturing and supply chain. Foreign OEM’s have already started leveraging these opportunities, and are encouraging Indian industry to adopt global best practices in their manufacturing processes to help create a gold standard supply chain and defence manufacturing ecosystem in India.
• A skilled talent pool: The India government estimates that a reduction in 20-25 percent in defence related imports could directly create an additional 100,000 to 120,000 highly skilled jobs in India.
  To be ready for the opportunities of the future, the industry needs to train talent to anticipate the demands of the market. At the same time, the academia and industry need to forge partnerships to encourage research and technological advancements.
• Robust supply chain: A strong supply chain is critical for a defence manufacturer looking to optimise costs.
  Gradually, Indian SMEs are playing key roles in the global supply chain of OEMs. With the government’s offset policies, procurement policies and regulatory incentives spurring the growth of a domestic defence industry, the SMEs could play a more active role in developing a robust supply chain.
• Infrastructure development: Lack of adequate infrastructure drives India's logistics costs upwards thus reducing the country's cost competitiveness and efficiency.
  Public-private partnership can go a long way in helping speed up infrastructure development in India.

The road ahead

India is uniquely positioned to create a vibrant defence manufacturing ecosystem that will achieve self-reliance. With defence remaining within the government’s high priority focus area, the country will soon emerge as a preferred destination for the co-development and co-creation of an indigenous and self-sufficient defence manufacturing ecosystem.