estimating self-reliance in india's defence production

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Institute for Defence Studies and Analyses

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Estimating Self-Reliance in India's Defence Production

Laxman K Behera

July 20, 2012

Event: Fellows' Seminar

Chairperson: Shri Vinod Misra

Discussants : Dr Selvamurthy and Shri Amit Cowshish

This paper attempts to estimate the self-reliance index of Indias defence production. While

estimating the index, it also focuses on three important issues; the approach towards

self-reliance (as understood in the Indian context), data problems in estimating the index andthe methodology used to arrive at the index. The paper suggests that a separate budgetaryclassification be made in the Defence Services Estimates to facilitate computation ofself-reliance in a more objective manner. This necessitates suitable changes in theclassification handbook for defence that mandates the concerned officials of the IndianDefence Accounts Department to book a particular expenditure.

Mr. Behera argued that the concept self-sufficiency differs from self-reliance, thoughthese have alternatively been used in the Indian context. Self-sufficiency means producing

everything in-house that the armed forces need, whereas self-reliance refers to equippingthe armed forces with a whole range of equipments that may come from foreign and

domestic sources. However, he argues that self-sufficiency is not an ideal path for acountry like India since Indias industrial and Research and Development (R&D) base is notyet sufficiently developed.

Mr Behera describes three phases of Indias defence industrialisation process from theperspective of the aim of self-reliance; from independence to mid-1960s, from mid-1960s tomid-1980s, and from late 1980s till present. In the first phase, self-sufficiency was an overalleconomic principle behind its industrial development as the leadership at that time felt that

the state-led intervention was the best way to overcome the de-industrialisation of economythat was caused by two centuries of the British rule. However, despite some successes, thismodel had faced considerable weaknesses because of the low level of defence allocationand defence R&D, in addition to the lack of a civil industrial base which had a major impactduring this phase.

In the second phase, according to the author, the events of 1960s, particularly the 1962border war with China and the 1965 Indo-Pak war, brought a major change in Indias defencepolicy, and the term self-reliance replaced self-sufficiency in defence production. Not onlyIndias defence budget as percentage of Gross Domestic Product (GDP) increased in the

subsequent years but also the approach towards arms procurement policy and indigenousdefence production. Moreover, unlike in the first stage of industrialisation, in the secondstage of Indias defence industrialisation, more attention was paid to license-production

rather then indigenous production, based on its own design and developmental efforts.However, this led to dependency on the license-based defence production, particularly onthe Soviet Union. Indias aeronautics industry is such a case whose dependency continuestill now. And, in the third phase, with increasingly aware of the pitfalls of the overdependenceon Soviet Union, India began to change its approach to defence industrialisation, from

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license-based production to production based on indigenous design. In this regard, Indiaand Russia signed in 1998 an intergovernmental agreement to jointly produce a supersoniccruise missile, BrahMos and in 2007 two more intergovernmental agreements were signed forco-development and co-production of a Multi Role Transport Aircraft and a Firth GenerationFighter Aircraft. Thus, there has been emphasis on self-reliance and co-production withhigher importance on promoting the participation of Indian private sector defence production.

A 10-year self-reliance plan formulated in 1992, under the then Scientific Advisor to the

Defence Minister, Dr A.P.J. Abdul Kalam, defined the self-reliance in the form of an index,reflecting the percentage share of indigenous content in total procurement expenditure. Mr

Behera held that this definition serves as the only methodology for estimating theself-reliance index, primarily because of the difficulty of putting together a log of informationabout what is critical and what is not, and updating it regularly with technologicaldevelopment. However, this estimation is not straightforward, primarily because of lack ofconsistent data in the public domain.

Mr Behera pointed out that Indias heavy dependence on arms import for defencepreparedness defies the very objective of self-reliance that it has set for itself. The 1992

Abdul Kalam committee indicated that the share of indigenous contribution to totalprocurement expenditure would progressively increase from 1992-93 estimation of 30 per

cent to 70 per cent by 2005. Although India has developed a vast defence industrial baseover the years, the objective of achieving 70 per cent self-reliance has not been achieved tillnow. He concluded by stating that the self-reliance index has barely improved from 1992-93estimation of 30 per cent to 36.4 per cent in 2011-12 which indicates the failure of Indiasdefence industrialisation process and demands serious retrospection.

Major Points of Discussion and Suggestions:

At present, Indias total defence R&D budget accounts for about six per cent of defence

budget which in itself is less than two per cent of GDP. Compared to this, othercountries, particularly the US and China spend a higher percentage of their defencebudget on R&D.It would be significant to look into and assess where India now stands at the global

scenario on self-reliance in defence production. As the Indian economy is growing, it islooking for the indigenisation of defence production. This is important not only to meetits own defence requirements for safeguarding its vital national security interests butalso to play a larger role beyond its immediate neighbourhood.Although today India has reached 100 percent self-reliance in terms of deterrence, itneeds to minimize the dependency on foreign countries for its defence needs by furtherenhancing and indigenisation of its defence production sectors.

India has already developed a good platform for co-production and development ofdefence equipment with Russia, now it should look for such joint production with other

countries.Indias private defence sector is very weak, and it cannot take big projects. However, itcan contribute in the defence production sector by joining with public sectors. For this,capacity building of the private sector is very important if it is to undertake futuredefence projects.The author pointed out that Kalam Committee Report has weaknesses which needed to

be addressed. In this regard it was suggested that the methodology adopted by KalamCommittee and others such as Dr. Balachandrans can be analysed in order to find outtheir strengths and weaknesses, and then the author can refine and adopt his ownmethodology for this study.The conclusion part of the paper also needs to be moderated. As the kind of datarequired for estimating self-reliance index is not available in public domain, the authorneeds to state it as a limitation in the papers conclusion. The author also needs to


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mention what kind of data is required to estimate the self-reliance in Indias defenceproduction.

Remarks by the Chairperson

Outlining the present status of self-reliance in Indias defence production, Mr Vinod KumarMisra said that the extent of Indias arms imports hamper indigenisation of its Defence PublicSector Undertakings (DPSUs). Imports of defence raw-materials and technologies have also

been a problem. In addition, it needs to sustain those imported technologies for a long time.However, self-reliance in defence production is a log term process and it will gradually takeplace in India. In this context, Indias new offset policy can be a significant game changer.However, for its success, it needs to identify the kind of defence technologies that it wants tomanufacture and then should focus on creating capacity on those core items. Mr Misra

pointed out that Indias defence production sector and R&D also suffer capability gap andthe Joint Ventures with Russia and Israel for co-production and development of defenceequipment can be one way of meeting this capability gap. There is also a strong case forincreasing Foreign Direct Investment (FDI) in the defence production sector but India has tofind out the ways to give a push to it. So far as policy announcement is concerned, Indian

government has recently issued policy guidelines for engaging the private sector. Someprogress has been made in this regard but still time will take in involving private enterprisesin big projects.

Report prepared by Dr Saroj Bishoyi [1], Research Assistant, IDSA

Source URL:http://idsa.in/event/EstimatingSelfRelianceinIndiasDefenceProduction

Copyright 2005 - 2013 IDSA. All rights reserved.


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