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After a strong showing in Operation Sindoor, companies now need support for comprehensive research and speedy procurement

India defence Agency

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	Operation Sindoor, launched on May 7 to avenge the Pahalgam terror attack and set a new paradigm of India&rsquo;s counterterrorism policy, heralded a new era for India&rsquo;s arms production. Indigenously designed and/or manufactured defence equipment played a direct and visible role in decimating Pakistani targets besides protecting India&rsquo;s territory from enemy attacks &mdash; something that Prime Minister Narendra Modi proudly acknowledged in his monthly radio address, Mann ki Baat, on May 25. Significantly, lethal war equipment supplied by the Indian private companies played a noticeable role, with loitering munitions and other types of drones playing havoc in the adversary&rsquo;s territory and psyche. This is not a mean accomplishment for the Indian private sector, which, at the beginning of this century, was not even permitted to produce defence items. If the outcome of Operation Sindoor is any indication, Indian private players are poised to play a far greater role in India&rsquo;s future wars.&nbsp;<small class="brtag" style="box-sizing: border-box; margin: 0px;">&nbsp;</small></div>
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	The journey of the private sector in the last two and a half decades has, however, been anything but rosy. Its abundant dynamism and innovative capacity were, in the past, sacrificed at the altar of India&rsquo;s import mindset and the narrow interests of the public-sector defence companies. It is only after 2014 that it has had some breathing space to contribute to India&rsquo;s arms production. The question is: Can India harness its full protentional to fight and win the next war, which will be more complex and tech-intensive than was the case during Operation Sindoor.</div>
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	<span style="box-sizing: border-box; margin: 0px; padding: 5px 0px; font-weight: 600; display: inline-block;">The private sector&rsquo;s tortuous journey&nbsp;</span></div>
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	The autarkic model that the Indian political leadership followed soon after Independence relegated the defence industry, along with sectors like space, nuclear energy and railways, to the preserve of the public sector. In the defence production domain, the private companies were forced to play a supporting role of providing parts, components and raw materials to the public-sector companies, which were entrusted to manufacture all types of defence hardware. However, with the public sector often failing in innovation and performance, the government was happy to import arms off-the-shelf or acquire their licences to help the public-sector behemoths to manufacture, resulting in a hefty annual import bill and the country earning the dubious distinction of being one of the biggest arms importers in the world.<small class="brtag" style="box-sizing: border-box; margin: 0px;">&nbsp;</small></div>
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	Despite the inability of the public sector to meet the growing needs of the armed forces, the government continued to keep the private enterprises at a distance, even after the country demolished its statist economic model of development in 1991. It took another decade for the government to finally unshackle the defence production from the clutches of the public sector when the Atal Bihari Vajpayee government took the final plunge in liberalising the defence industry in 2001.<small class="brtagPara">&nbsp;</small>
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		Even though 2001 marked the liberalisation of India&rsquo;s arms production, the path ahead was not easy for the private companies. Barriers continuing from the erstwhile regime prevented it from meaningfully contributing to India&rsquo;s defence production. The stringent licence regime that accompanied the 2001 liberalisation policy became a major hindrance for the private sector. The biggest barrier was, however, the mindset, with the government showing little confidence that private companies could be trusted in a strategic sector like arms production. In the absence of governmental support, the only viable path for the private sector to grow in the defence business was to tie up with foreign companies to undertake certain outsourcing work that came out of the defence ministry&rsquo;s offset policy.</div>
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		<blockquote class="blockquoteBG styleQ1" style="box-sizing: border-box; margin: 13.7083px; padding: 8px; background-color: rgb(255, 245, 235); overflow: hidden;">
			<p style="box-sizing: border-box; margin: 0px 0px 4px; padding: 0px; max-width: 100%; width: 642.083px; float: none !important; line-height: 28px !important;">
				<span style="box-sizing: border-box; margin: 0px; padding: 0px; color: rgb(128, 0, 0);"><span style="box-sizing: border-box; margin: 0px; padding: 0px; font-size: 16px;"><span style="box-sizing: border-box; margin: 0px; padding: 5px 0px; font-weight: 600; display: inline-block;">Despite the inability of the public sector to meet the growing needs of the armed forces, the government continued to keep the private enterprises at a distance, even after the country demolished its statist economic model of development in 1991.</span></span></span></p>
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			<span style="box-sizing: border-box; margin: 0px; padding: 5px 0px; font-weight: 600; display: inline-block;">Make in India&nbsp;</span></div>
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			The Make in India initiative, launched by the Narendra Modi government in 2014, has proved to be a major turning point for the Indian private sector. In a clear intent to enhance India&#39;s self-reliance in defence procurement and transform the country into a major arms exporter, the government announced a host of reform measures that included a simplified licensing regime, an industry-friendly export policy and several provisions to bring in a semblance of level - playing field between public and private sectors. At the same time, the Ministry of Defence (MOD) also announced several new initiatives to plug into India&rsquo;s growing startup ecosystem for the development of new-age defence technologies. The iDEX scheme, launched by Modi in 2018, became a signature policy instrument for India&rsquo;s small innovators to develop frontier defence technology which were hardly on the radar of the established players. The scheme has proved quite successful, with the government engaging nearly 450 innovators until now and several technologies being developed as a result.&nbsp;<small class="brtag" style="box-sizing: border-box; margin: 0px;">&nbsp;</small></div>
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		With a friendly policy framework in place and government&rsquo;s willingness to trust the private players, the latter have grabbed every opportunity that has come their way. Within a short span of about 10 years, the private sector has captured a sizeable portion of India&rsquo;s defence production. By 2023-24, its share in India&rsquo;s total defence production has jumped to over 20 per cent, which is more than the total contribution of the 40-odd ordnance factories &mdash; now converted into seven defence public sector units &mdash; which boast a domain expertise of more than two centuries.&nbsp;<small class="brtag" style="box-sizing: border-box; margin: 0px;">&nbsp;</small></div>
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		The private sector is now manufacturing a host of defence equipment, ranging from transport aircraft, artillery guns and naval vessels to ammunitions, drone and anti-drone systems and electronic warfare system. This is besides their silent participation in the supply chain of both Indian and global defence majors.<small class="brtag" style="box-sizing: border-box; margin: 0px;">&nbsp;</small></div>
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		One noteworthy performance of the private sector has been in the area of defence exports. Accounting for about 60 per cent (or Rs 13,968 crore) of India&rsquo;s total defence exports in 2024-25, the private sector not only dwarfs the public sector, but shows its agility, dynamism and competitiveness in the international market &mdash; something the government-owned companies have failed to show in their long history of operations.&nbsp;<small class="brtag" style="box-sizing: border-box; margin: 0px;">&nbsp;</small></div>
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		Some of the notable Indian private companies which have achieved international success include Big Bang Boom Solutions, a Chennai-based startup which won a defence contract in Kenya; Bharat Forge, a big private company which obtained an export order to supply artillery guns from a West Asian country; and Tatas, which were awarded a Moroccan contract to locally manufacture its defence vehicle. Tatas are also the single-source supplier to American defence majors Boeing and Lockheed Martin for certain aerospace structures and components.<small class="brtag" style="box-sizing: border-box; margin: 0px;">&nbsp;</small></div>
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		The most cherished moment for the private sector undoubtedly came during Operation Sindoor, which displaced the firepower of private companies.&nbsp; Sky Striker, a kamikaze done manufactured by the Bangalore-based Alpha Design in partnership with Israel&rsquo;s Elbit, and Nagastra-1, manufactured by the Nagpur-based Solar Industries, were particularly noticeable during Operation Sindoor. While these two drone manufacturers caught the news headlines, many other private companies played an important role through their parts and components that went into Akash and Brahmos missiles and the Defence Research and Development Organization&rsquo;s (DRDO&rsquo;s) D4 anti-drone system.&nbsp; The success of these companies can only be attributed to their tenacity to work in an industry which is infamous for an uncertain and sporadic business environment.&nbsp;</div>
	<small class="brtag" style="box-sizing: border-box; margin: 0px;">&nbsp;</small><span style="box-sizing: border-box; margin: 0px; padding: 5px 0px; font-weight: 600; display: inline-block;">Barriers to progress</span><small class="brtag" style="box-sizing: border-box; margin: 0px; padding: 0px;">&nbsp;</small>
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		Even though the private sector has made a giant stride under the Make in India regime, they have not reached a fraction of their potential. There remain several challenges which restrict their capacity and capability from being fully utilised. Two key challenges that afflict the private sector are the government&rsquo;s institutional and procedural rigidities while dealing with the private companies, and a lack of a robust R&D culture and incentives.&nbsp;<small class="brtag" style="box-sizing: border-box; margin: 0px;">&nbsp;</small></div>
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		Even though the government has facilitated the private sector&rsquo;s forays into arms production, the MoD&rsquo;s procurement machinery still favours the public sector. The fear of controversy and a lack of domain expertise among the procurement authorities have often slowed down the decision-making process involving the private sector. This has had a debilitating impact, especially on the startups and small and medium companies which do not have deep pockets to sustain business without a timely and guaranteed order.&nbsp;&nbsp;<small class="brtag" style="box-sizing: border-box; margin: 0px;">&nbsp;</small></div>
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		A bigger obstacle is the government&rsquo;s tardiness in supporting R&D by the industry in general and the private sector in particular. For sure, iDEX has proved to be a big success; in less than seven years since its launch, Rs 2,300 crore worth of contracts have been approved by the government for the procurement of items developed by the iDEX winners.However, many other initiatives of the government to promote R&D in the private sector are yet to take root.&nbsp;<small class="brtag" style="box-sizing: border-box; margin: 0px;">&nbsp;</small></div>
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		The Technology Development Fund, which is similar in intent to iDEX but operated by the DRDO, has not seen much traction, apparently due to procedural rigidity and lack of business viability. Similarly, the Make procedure, which has undergone several rounds of revisions since its first articulation in 2006, has yet to make a big dent in awarding a large number of prototype development contracts to the private sector. The government&rsquo;s decision to open up 25 per cent of the defence R&D budget for the private sector has also not seen any traction beyond the policy announcement.<small class="brtag" style="box-sizing: border-box; margin: 0px;">&nbsp;</small></div>
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		If the government has been tardy in stimulating R&D within the industry, the industry, especially the big private companies, has also been found wanting in spurring innovation. According to the Department of Science and Technology, there are only 35 registered private entities which undertake defence R&D. As of 2020-21, their combined R&D spend was a mere Rs 600 crore. This is inadequate, to say the least, to foster defence technologies which are advancing at a rapid pace.&nbsp;</div>
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		<span style="box-sizing: border-box; margin: 0px; padding: 5px 0px; font-weight: 600; display: inline-block;">Winning the next war</span></div>
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		Operation Sindoor was a decisive military action to punish Pakistan and reestablish a credible deterrence. However, given the centrality of the army in Pakistan&rsquo;s polity, it is unlikely that Islamabad will be deterred forever.&nbsp; What is for sure is that next time a conflict erupts with Pakistan or its all-weather friend China, the adversary will be better prepared with superior technologies and weapons. Given this, India has little option but to strengthen both its offensive and defensive capabilities, including by harnessing the newer technologies. The private sector, in its limited journey of a quarter century, has done reasonably well in developing and manufacturing a range of defence items. However, going forward, a more aggressive and supportive policy is required to harness its full potential. A speedy and predictable procurement machinery that supports the private sector through timely orders and a comprehensive R&D scheme to incentivise innovation by private players will go a long way in arming the Indian armed forces to fight and win the next war.&nbsp;</div>
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		<em style="box-sizing: border-box; margin: 0px; padding: 0px;">Laxman Kumar Behera is an associate professor at the Special Centre for National Security Studies, Jawaharlal Nehru University, New Delhi. Views are personal.</em></div>
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The private defence sector steps up but structural gaps persist

Written By

Amit Bhartia