By Ramakrishna Upadhya
Inaugurating the 10th edition of Aero India International Air Show in Bengaluru on Wednesday, Prime Minister Narendra Modi declared that India will soon emerge as a major global centre for defence industry and called upon international community to use the country as part of the global supply chain.
Modi said foreign firms must turn into strategic partners from a position of sellers. “We need their technology, skills, systems integration and manufacturing strength. We are reforming our defence procurement policies and procedures. There would be a clear preference for equipment manufactured in India.”
The government, he said, is introducing a scheme to provide up to 80 per cent of funding for development of a prototype in India. “We are also launching a Technology Development Fund.”
The Prime Minister said “for far too long, our research and development has been confined to government laboratories. We must involve our scientists, soldiers, academia, industry and independent experts more closely in research and development.”
Stating that he was pleased with the positive impact of ‘our policies’, he said “Indian private corporations have responded with enthusiasm. There is new excitement in our small and medium scale sector. Many of the biggest global firms are forming strategic partnerships in India. Some of them have already begun using India as part of their global supply chains or engineering services.”
“In September 2014 Dynamatic Technologies and its collaborator Boeing inaugurated a plant in India to manufacture critical parts for a Boeing helicopter that is sold globally. I understand that it was a day after Make in India was launched. I am pleased to learn that the first set of parts is ready for shipment today. But, we still need to do more.”
State of the art technology
Modi said after the National Democratic Alliance (NDA) government came to power in May, 2014, the government had raised the permitted level of Foreign Direct Investment to 49 per cent. “This can go higher, if the project brings state-of-the art technology. We have permitted investments up to 24 per cent by Foreign Institutional Investments. And, there is no longer a need to have a single Indian investor with at least a 51 per cent stake. Industrial licensing requirements have been eliminated for a number of items.”
He said after the new government came to power the country’s export policies had been made clearer, simpler and predictable. “But, we will also abide by the highest standards of export controls and international responsibility. We will expand our exports, but we will ensure that our equipment and technology do not fall into the wrong hands. India’s record in this area has been impeccable and it will remain so.”
The Prime Minister stressed the need for further reform in acquisition and approval processes. “We must indicate a clear roadmap of our future needs. This must take into account not only new technology trends, but also the nature of future challenges. We must pay attention to developing supply chains, with emphasis on innovation. We must bridge the gap between prototype development and quality of production.”
He said, in India, the defence industry in the government sector alone employs nearly 200,000 workers and thousands of engineers and scientists. They produce an output of nearly 7 billion dollars annually. It also supports a very large pool of small and medium enterprises. Our defence industry in private sector is still small. But, it already employs thousands of people. This is despite the fact that nearly 60 per cent of our defence equipment continues to be imported. And, we are spending tens of billions of dollars on acquisitions from abroad.”
Increasing domestic procurement
There are studies that show that even a 20 to 25 per cent reduction in imports could directly create an additional 100,000 to 120,000 highly skilled jobs in India. If we could raise the percentage of domestic procurement from 40 per cent to 70 per cent in the next five years, we would double the output in our defence industry. Imagine the impact in terms of jobs created directly and in the related manufacturing and services sector! Think of the spin off benefits on other sectors in terms of advanced materials and technologies! That is why we are focusing on developing India’s defence industry with a sense of mission.”
This is why it is at the heart of our Make in India programme.”
The Prime Minister said a nation with a strong defence industry will not only be more secure. It will also reap rich economic benefits. It can boost investment, expand manufacturing, support enterprise, raise the technology level and increase economic growth in the country. “We are reforming our defence procurement policies and procedures. There would be a clear preference for equipment manufactured in India. Our procurement procedures will ensure simplicity, accountability and speedy decision making.”
Pointing out that more than 250 Indian companies and in excess of 300 foreign companies were participating in this year’s Aero India show, making it the largest ever, Mr Modi said this reflects a new level of confidence within our country and global interest in India.
He said, “We have to equip ourselves for the needs of the future, where technology will play a major role. As a nation of one billion people, we also have huge requirements for managing internal security. We are increasingly integrating technology and systems into it. These opportunities make Aero India an important international event. For me, this is not just a trade fair for defence equipment. This is a mega meeting of one of the largest global supply chains, with the most advanced technology and complex equipment. And, a platform to launch India’s defence manufacturing sector. We speak in terms of national capacity, not public sector or private sector.”
Modi said the offsets system is a crucial instrument to develop and upgrade the defence industry. “We have introduced significant reforms in our offsets policy. I am acutely aware that it still needs a lot of improvements. We will pursue them in consultation with domestic industry and our foreign partners. I want our offsets policy not as a means to export low-end products, but to acquire state-of-the art technology and skills in core areas of priority.”
Universities and skill development centres
The Prime Minister said the country needed a vast pool of highly skilled and qualified human resources for the defence industry. “Our aerospace industry alone would need about 200,000 people in another ten years. We will set up special universities and skill development centres to cater to our defence industry, just as we have done in atomic energy and space.
“I have especially invited the State Governments to come here with package of facilities to attract investments in defence manufacturing. This is a new era for the defence industry in India. It will be no longer enough to buy equipment and simply assemble them here. We have been doing this in the past, without absorbing any technology or developing our own capabilities. In some areas, we are where we were three decades ago.”
The Prime Minister admitted that the country’s public sector needed to do much better than they were doing now. “We have to exploit their huge assets and a vast potential. At the same time, we have to make them accountable. We want to develop an industry is dynamic. It should constantly stay at the cutting edge of the global industry. I am confident that India will emerge as a major global centre for defence industry. We have the basic building blocks for it in India; and, a large nation requirement.”
Modi said the nature of industry is such that imports will always be there. In turn, they can use India as part of their global supply chain. “Defence budgets around the world are becoming tighter. India’s frugal but sophisticated manufacturing and engineering services sectors can help reduce costs. India can also be a base for export to third countries, especially because of India’s growing defence partnerships in Asia and beyond.
“A strong Indian defence industry will not only make India more secure. It will also make India more prosperous. Aero India can be a catalyst in realizing our goals. That is why I am here today. So, as we look at these wonderful aircraft and enjoy the amazing fly pasts, I also hope we can get some business done. And, sow the seeds of successful new ventures and partnerships – to give our people new opportunities, to make our nations safer, and the world more stable and peaceful.
The Karnataka Chief Minister, Siddaramaiah said Karnataka, especially Bengaluru was well positioned to become the aerospace hub. Karnataka government had an aerospace 2013-2023 policy. Inviting investments into the state, he said the United Nations had ranked Karnataka as the fourth global technology hub.
The Minister for Defence, Manohar Parikkar, in his welcome address said the department of defence would work hard to make a success of the Prime Minister’s ‘Make in India’ campaign. The Minister of State for Defence, Rao Inderjit Singh, Union Civil Aviation Minister Ashok Gajapathi Raju and Union Ministers from Karnataka, Ananth Kumar and Sadananda Gowda were among those who graced the occasion.
By Ramakrishna Upadhya