Towards a Robust Indian Defence Industry

As India celebrates its 67th Independence Day, the country can justifiably look back with pride at its many accomplishments in the spheres of economy, society and industry. India has served as an example of a country with both a robust democracy and a fast growing economy.

One area, however, that has continued to be under evolution and debate has been the achievements when it comes to the defence industry.  India continues to import over 70% of its defence equipment, a situation which is neither tenable from a security nor financial point of view.

The ambition to develop an indigenous Indian defence industry has been given increased prominence in the recent past and highlighted in policy statements both from government and opposition parties. It has been emphasized that both the Indian public and private sectors should play a larger role in producing state-of-the-art equipment for the Indian forces.

India and Sweden have one over-arching commonality on the issue of defence and the defence industry: for both countries, the cornerstone of their foreign and security policy is a stern adherence to independence. Both countries have abstained from joining military alliances and thus have to rely on their own efforts to defend their territories.

The challenge in India is to build domestic capability, which would be fully based on cutting edge technology. The process requires Indian public and private sector defence companies to leapfrog technologies and start designing, developing and producing state-of-the-art systems in the immediate future and not through protracted development programs. The only way to do so in a rapid way is to make use of technology developed by companies outside India. Currently, defence procurement has tried to tackle this challenge mainly through strong offset requirements. However, while offsets do meet the requirement of a return on expenditure for a country, it has not proven to be adequate for developing an industrial base in the purchasing country. It rarely accomplishes a true transfer of technology to the Indian company. Foreign companies often leave once offset requirements are met.

The end result of the Government’s efforts should be the creation of a foundation for an indigenous defence industry that will ensure that the country does not need to look externally for its future strategic defence requirements. In addition, such programs should have significant spillover of technology to non-defence sectors.

Sweden and Saab have successfully proven that they can do both. Riding on the back of the Gripen programme, 75 South African companies partnered in Saab projects through Defence Industrial Participation (DIP), which involved the delivery of US$1. 5 billion of new economic activity into airspace and defence sectors. Similarly, the National Industrial Participation (NIP) comprised US$7.2 billion of new economic benefits derived primarily from manufacturing for export ventures in various civil sectors. According to a study by Professor Gunnar Eliasson, the civilian value created around Gripen in Sweden was at least 2.6 times the investment over the entire period.

Clearly, India’s drive towards indigenous defence capability requires partners with state-of-the-art technology that can be transferred to India with the support of their government. More importantly, such companies should be driven by self-interest to carry out real transfer of technology and a genuine interest in joint development of new generations of products.

Swedish companies such as Saab have already identified India as a strategic market, from where they plan to build their future. Saab takes a long-term view of its relations with India and has proven to be a credible and dependable partner with aligned strategic interests of cooperation. The technological capabilities of Saab and the human resources and capabilities of Indian public and private sectors provide for a very solid ground to create a mutually interdependent, transparent, ethical and aligned defence development and manufacturing industry.