India, one of the world’s top importers of military hardware, has unveiled an ambitious plan to locally produce defence equipment worth ₹1.75 trillion ($25 billion) a year by 2025. The plans outlined in the latest draft of the Defence Production and Export Promotion Policy 2020 (DPEPP 2020) unveiled on 3 August 2020 underscore attempts by the government to push local manufacturing of arms to reduce costly imports and achieve self-reliance.
  1. Identifying the defence sector as a driver to boost the overall economy, the draft policy set an annual export target of ₹35,000 crore in aerospace and defence equipment and services within the next five years.
  2. India has consistently featured among the world’s top three importers for many years. Estimates suggest the Indian armed forces could spend about $130 billion to procure defence equipment in the next five years.
  3. The share of domestic procurement in overall defence procurement is about 60%. In order to enhance procurement from domestic industry, it is incumbent that procurement is doubled from the current ₹70,000 crore to ₹140,000 crore by 2025, according to the draft document.
  4. India remained the world’s second-largest arms importer during 2015-19, with Russia as its largest supplier, though Moscow’s share of the Indian weapons market declined from 72% to 56%, the Stockholm International Peace Research Institute (SIPRI) said recently.
  5. In May, finance minister Sitharaman announced a series of steps for the defence sector, including a separate budgetary outlay to procure locally made military hardware, lifting the limit on foreign direct investment from 49% to 74% under the automatic route and generating a year-wise negative list of weapons that would not be imported. 
  6. The draft policy is currently available on the defence ministry’s website for public comments, which can be sent until 17 August.
  7. DPEPP 2020 is envisaged as “a guiding document" to provide a “focused, structured and significant" thrust to production of military hardware and platforms for self-reliance and exports. 
  8. It is aimed at “developing a dynamic, robust and competitive defence industry", including aerospace and naval shipbuilding, to cater to the needs of the armed forces.
  9. The paper has recommendations to boost domestic defence manufacturing so that the sector complements the government’s aim to make the country a $5 trillion economy by 2024, it added.
  10. To support the local industry, critical products and materials that are currently imported could be procured through long-term orders by defence public sector undertakings (DPSUs)
  11. In such cases, the resultant single vendor should also be acceptable with due price discovery and negotiations, the document says. 
  12. It has also proposed indigenization of around 5,000 imported components by 2025. These components, including alloys and special materials, and sub-assemblies for defence equipment will be made in India.
  13. On increasing defence exports, the policy states defence attachés in Indian embassies have been mandated and are supported to promote exports of defence equipment.