Is India becoming more self-reliant in defence?

In his Independence Day speech, Prime Minister Narendra Modi called for innovation in defence products. And just fortnight ago, Army Chief General MK Pande had said that the country’s interests are best served by being self-reliant, especially in defence productions. And that the future wars cannot be fought and won on what he called "borrowed technology".

India has come a long way since 1971, when the war with Pakistan saw the Indian Navy use its aircraft carrier, INS Vikrant, and its Seahawk aircraft to blockade Bangladesh. INS Vikrant was previously known as HMS Hercules, before India acquired it from the United Kingdom. Fast-forward to 2022. In July, India’s first indigenous aircraft carrier, also christened Vikrant, was handed over to the Navy. It will be commissioned later this month.

It is not just INS Vikrant. The country has been making strides towards self-reliance. Hindustan Aeronautics Limited is aiming to secure a deal for its Tejas Light Combat Aircraft in Malaysia.
 

In January, India had signed a 375-million-dollar contract for the supply of BrahMos cruise missiles to the Philippines. This constituted India’s largest-ever weapons sale abroad.

The government numbers show an encouraging trend. As a proportion of total procurement, capital expenditure on imported defence equipment declined from 41.89 per cent in FY20 to 35.28 per cent in FY22.

But a closure look reveals another story. It remains unclear how these import numbers were arrived at. Under the Defence Procurement Procedure 2016, the extent of indigenous content in the procured equipment is calculated by excluding specific elements from its total cost at all stages of manufacturing, production, and assembly.

These elements are the direct costs of all materials and products imported into India, along with the direct and indirect costs of all services obtained from foreign entities or citizens. All license fees, royalties, technical fees and other fees or payments paid out of India and statutory levies in India like taxes, duties, and cesses also have to be excluded. But, there is a question mark on whether or not this method has been adhered to in both letter and spirit.  

[Byte of Amit Cowshish on lack of transparency on % of IC in defence items]

If you cannot measure it, you cannot manage it. But, how you measure also matters, especially if the goal is increasing defence indigenisation. And, DPP 2016’s ‘monetary-value’ calculation method might not be the most suitable one.

[Byte of Amit Cowshish, Ex-Financial Advisor (Acquisition), Ministry of Defence, on problems with DPP 2016's IC calculation method and lack of focus on core technologies.]

Becoming self-sufficient in core technologies remains the real challenge. At present, the Tejas is powered by an American engine. As will India’s future stealth combat aircraft. Although India is exploring collaboration with foreign defence majors for co-producing engines for the latter. Meanwhile, the Navy's ships rely on power plants designed by foreign firms. And, India is again hunting for a foreign conventional submarine design, despite the Make in India Scorpène initiative.  

The government might also have to set its sights higher. As of the 5th of August, three positive indigenisation lists comprising 310 items have been released. These lists clearly spell out the timelines beyond which these items must be compulsorily procured from Indian companies. Though laudable, this indigenisation initiative has its own limitations.  

Ajai Shukla of Business Standard says these lists lack ambition. All of their items are  already indigenised. They don't present an accurate picture of indigenisation challenges.

Shukla also argues that Make in India for defence products is handicapped by the absence of large orders. In the past, there have also been cases where products designed, developed and manufactured in India failed to qualify for indigenous status because of the government's tendency to place such small orders that it was uneconomical to carry out import-substitution for many components.
 

Ajai Shukla of Business Standard says, buying just 40 Tejas jets was example of anaemic govt orders. Order for 83 Tejas jets has improved economies of scale.

As Lt Gen H S Panag has pointed out, successive Indian governments have failed to formalise and declare a formal national security strategy. Such a strategy would form the basis of all defence planning, capability development, and fund allocation. In its absence, the Atmanirbhar mission will remain delinked from India’s long-term strategic needs. It remains to be seen if the current government will remedy this.