02:59 GMT +316 December 2018
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    India's mobile surface-to-air missile defense system Akash is displayed during a press day of the Seoul International Aerospace and Defense Exhibition in Goyang, north of Seoul, on October 28, 2013

    'Make in India' Fails to Boost New Delhi's Defense Development - Data

    © AFP 2018 / JUNG YEON-JE
    Asia & Pacific
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    In 2015, Indian PM Modi launched the ambitious ‘Make in India’ scheme under which special attention was given to liberalize foreign direct investment norms to promote local manufacturing of defense equipment. However, the latest data suggests purchases from foreign firms remain the mainstay for the forces.

    Despite the Indian government's all-out efforts to increase the share of local manufacturing of defense paraphernalia, India's defense equipment purchases from domestic manufacturers have actually gone down in the last four years. Data provided by India's Ministry of Defense on Monday revealed that defense equipment purchases from Indian vendors fell by over two percentage points while procurement from foreign vendors went up during the same period.

    READ MORE: India's Defense Sector Prepares for 100% Foreign Direct Investment

    In 2015-16, 62.80% of the total capital expenditure was ordered from Indian vendors for the purchase of defense items by the three services which was 60.08% in the 2017-18. During the same time frame, defense equipment purchased directly from foreign companies went up to 39.92% in 2017-18 from 37.20% in 2015-16, the Indian defense ministry informed parliament on Monday.  

    Moreover, the percentage of imported content in defense purchases is much higher than what is projected in the data provided by the ministry as the data subsumes the cost Indian vendors spend on importing defense equipment to assemble the final output. Last Friday, Defense Secretary Ajay Kumar highlighted the scale of this conundrum. 

    "Last year, the total production by defense public sector undertakings and the Ordnance Factory Board was about INR 59,000 crore (around $9 billion), of which INR 13,800 crore (over $2 billion) was the value of imported components. That is roughly 24 percent. But when we look at Hindustan Aeronautics Ltd (HAL), imported components is nearly 40 percent," Defense Secretary Ajay Kumar said during a seminar in New Delhi.

    READ MORE: India to Shed More Rules to Bag $5 Billion Foreign Investment in Defense

    The data and facts do not match the expectations of the ambitious ‘Make in India' scheme. The country's defense industries have attracted a meager $10,000 foreign direct investment (FDI) in the year 2017-18. In 2016-17, the industries failed to attract any FDI.  

    Nevertheless, the defense ministry has sought to justify the increase in the purchase from foreign vendors by clarifying that capital procurement of defense equipment is based on threat perception, operational challenges, and technological changes and to keep the army in a state of readiness to meet the entire spectrum of security challenges.

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    Tags:
    foreign direct investment (FDI), domestic, Defense Procurement, Make in India, industry, Indian Defense Ministry, Hindustan Aeronautics Limited (HAL), India
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