The following report was released by Brookings India on
August 8, 2019. The full report can be downloaded here.
Executive Summary
An indigenous defence industry is a vital objective for
India given its security environment and strategic objectives. India has a
large and growing defence budget and a long history of defence industrial
production. However, the country remains heavily reliant on defence imports,
particularly for major platforms, while its own exports are extremely meagre.
Although several high-level committees have been established to address the
problem of defence industrial indigenisation, very few of the necessary steps
have been taken. In part, this is because India faces a number of dilemmas in
trying to reform its defence industry: the normal rules of market economics do
not apply; ideal objectives of quality, cost, and timeframes cannot be achieved
simultaneously; defence budgets remain susceptible to cuts; the nature of
defence supply chains is changing; and little heed has been paid to policies to
maximise technological absorption. Moreover, major stakeholders confront their
own challenges: India’s powerful defence public sector faces conflicts of
interest and is resistant to change; the armed services provide unrealistic
qualitative requirements; the Ministry of Defence lacks specialisation; the
Finance Ministry discourages long-term spending; and the political leadership
lacks expertise and is reluctant to make decisions due to political
perceptions. To address these diverse challenges, efforts should be made to
ensure predictable long-term requirements and create a more level playing field
between the public and private sectors. Further, a mechanism must be found to
ensure predictable capital expenditure, in order to incentivise investment.
Without such steps being taken, India will continue to struggle in its quest
for defence indigenisation.
Read the full report here.