MoD spells out 5-point plan for arms industry to produce $26 billion annually by 2025 - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Thursday 19 September 2019

MoD spells out 5-point plan for arms industry to produce $26 billion annually by 2025

By Ajai Shukla
Business Standard, 18th September 19

Defence Minister Rajnath Singh and his officials, addressing a defence industry gathering in New Delhi on Tuesday, spelt out a five point plan for raising India’s annual defence production from the current Rs 80,000 to $26 billion (Rs 1,82,000 crore) annually, by the year 2025.

“For this Indian defence industry needs to grow at the rate of 15% per annum,” said Singh.

With growth likely to come mainly from the private sector, Singh revealed that, of the current annual arms production of Rs 80,000 crore, private industry currently accounts for Rs 16,000 crore. In addition, the public sector outsources about 40 per cent of its production from private firms.

With the Indian defence budget limited in how much it could spend, the defence minister underlined export as a major driver. Over the last five years, defence export have witnessed a substantial rise, reaching Rs 10,745 crore ($1.5 billion) last year. The Defence Production Policy (DPrP) sets an annual target of $5 billion by 2025. 

The defence minister also stated that his ministry’s new “end-to-end online offset processing portal” has facilitated of offsets to the tune of $ 1.5 billion. 

Sanjay Jaju, Joint Secretary in the defence ministry, spelt out the government’s proposed five-point action plan for achieving the DPrP’s ambitious targets. “This will be a public document, we have already carried out consultations with industry,” he said.

The first point is a focus on developing entrepreneurs and empowering them to take risks. The ministry’s “Innovations for Defence Excellence” (iDEX) initiative, which engages with startups is a key driver, with 44 start-ups moving towards production. “We must move from a production mindset to the generation of intellectual property”, said Jaju.

The second driver will be a focus on cutting-edge technologies such as artificial intelligence, drones and related products. A third driver is the new liberalised business eco-system, which is being transformed by reforms like GST. “India now has a one-country, one-tax environment. This creates huge opportunities for improving our supply chains and logistics”, said Jaju.

The fourth reform is the new openness of policymakers towards defence industry, enhancing feedback and the ease of doing business. Finally, there is a drive to create the skill sets needed to produce new products, services and technologies.

Singh also underlined that the Defence R&D Organisation (DRDO) would act as a technology engine for the private sector. “Government is working on a new policy to facilitate Transfer of Technologies (ToT) developed by the DRDO,” he said. 

He said the DRDO has signed more than 900 technology transfer agreements with industry so far.

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