The fourth tranche of the economic stimulus package announced by the Finance Minister on 16th May 2020 covered eight important sectors of the economy to bring in more investment and job opportunities. It is significant that the defence sector is included in these core sectors. The key takeaway for the defence sector is that the measures proposed are not only to give a fillip to the defence production in the country but also to step up the quality of the weapons and equipment to be manufactured which has long been dogged with subpar production standards which have not able to match global quality.
The plan to corporatize the Ordnance Factory Board (OFB) is a long awaited reform which was a key recommendation of the Kelkar Committee on “Revitalising Defence Public Sector Undertakings and Ordnance Factories” as far back as 2005.The OFB is the is the oldest departmentally run defence production organisation in the country. It is hoped that corporatization will usher professionalism, better productivity and quality in the Ordnance Factories.
The announcement of increase in Foreign Direct Investment (FDI) limits from 49 percent to 74 percent under automatic route subject to security clearance should provide the necessary incentive to Original Equipment Manufacturers (OEMs) from other countries to set up their manufacturing facilities in India, especially in the Defence Industrial Corridors in Tamil Nadu and Uttar Pradesh.
The indigenisation of spare parts for foreign systems already in service will go a long way in ensuring greater self reliance and better serviceability of the weapon systems.
Another reform which will provide a great deal of visibility in the defence budget as well as a realistic indicator on funds allocated and spent on domestic equipment is a separate capital budget for domestic procurement.
Samdesindia is a great initiative. It was long overdue. It should help in convergence of civila and military thought leadership to achieve shared national goals.
ABA ushers exciting prospects for redefined Make in India. We not only welcome indigenous designed and developed products and technologies but also local manufacture of foreign designed products.
Make in India by Indian companies, whether Indian owned or foreign owned. FDI reforms are welcome to the extent it results in greenfield manufacturing repairs and logistics facilities in India. When there is no hesitation in importing defence hardware, why hesitate giving foreigners majority control in Indian companies setting up greenfield facilities in India. Since large investments are required, investors’ reasonable concerns have to be taken on board.
Hopefully we will see a flurry of reforms to improve ease of doing business and reducing cost of doing business in India.
Congratulations once again.