16 Feb 2021
Since its opening for private sector participation in 2001, the Indian Aerospace and Defence Sector has grown steadily. In recent years, it has marked its presence, albeit in a small way, in the global market as well. The COVID-19 pandemic affected the Defence Industry in the same manner as in other sectors of economy by disrupting supply chains, manufacturing activities, inspections, transportation, etc., impacting delivery schedules, and holding up payments.
The Government of India and the Ministry of Defence implemented several initiatives to mitigate the financial stress caused by the pandemic, which were well received by the industry. These steps greatly helped the industry to quickly resume and maintain production of defence goods and services even during the lockdown period.
Covid-19 also highlighted our country’s dependence on imports for key and critical raw materials and intermediate inputs for several sectors of economy, notably pharmaceuticals, electronics, renewable energy and defence. Even such sectors as gems and jewellery, textiles and leather, which generate a fair amount of exports, were found to be vulnerable as the logistics chains were disrupted, given dependence on foreign intermediate inputs. Alongside economic disruptions, India faced other challenges. India’s Defence Forces became actively engaged with its Northern neighbour across the Line of Actual Control (LAC). These situations accentuated India’s dependence on imports and its vulnerability in strategic sectors.
The Prime Minister’s clarion call for “Atmanirbhar Bharat” is to look at this adversity as a trigger to launch a strong national drive, across all the industry sectors, for manufacturing all key and critical raw materials and intermediate inputs within the country. This alone will make us ‘self-reliant’, strong and capable for meeting challenges in the future.
The Government has given a strong push to indigenise the requirements of the armed forces. Defence Production and Export Promotion Policy 2020 has been introduced to promote domestic production and exports. The release of the Defence Acquisition Procedure 2020 and the revised Defence Procurement Manual will bring in the much-needed efficiencies in the acquisition processes. A negative list for imports for defence sector, together with a separate allocation of capital budget for domestic industry, bodes well for growth and sustainability of the sector.
CII has been proactive and instrumental in shaping these changes in policies and procedures by actively pursuing industry recommendations with the Government. Through such efforts over the years, we have been able to build the capacity and capability of the domestic industry.
Most recently, the Government cleared India’s largest ever indigenous defence deal worth $6.5 billion for the purchase of the LCA MK1A Tejas from Hindustan Aeronautics Ltd. The contract is set to employ about 500 companies as part of the design and manufacturing process. This deal is reflective of the confidence that both the Services and the Government have in the domestic industry to deliver high-technology defence equipment. Such assignments to both public and private sector domestic companies will benefit the MSMEs ecosystem as well.
With support from the Government and the Services, CII along with the Society of Indian Defence Manufacturers (SIDM) will continue to work with all stakeholders to make India ‘atmanirbhar’ in defence production.
The article by Mr Chandrajit Banerjee, Director General, CII first appeared in the January 2021 issue of CII Policy Watch. Click here to read the complete issue.