India has become the world’s largest defense importer and has effectively and efficiently held this position. It is the 6th biggest defense spender internationally and the 2nd largest spender in Asia, as per a report released by the Stockholm International Peace Research Institute (SIPRI). Their findings are based on data provided by nations to the UN.
In order to bring about a change in the status, India has started encouraging increased participation from the private sector. This includes the Defence sector small and medium-sized enterprises.
As per the experts, a robust defense SME sector in India emerge has the capacity to emerge as a global power. The Defence Procurement Policy (DPP) with this objective seeks to prepare Small Medium Enterprises of India’s defense.
The government of India’s defense document has prepared the tone for procurement with precise emphasis on the “Make in India” campaign. It also focuses on self-reliance also provides more importance to the native SME sector.
Although a vibrant SME sector is important to India’s defense strategies, its opinions and proposals often were not given much importance initially.
The Ministry of Defence has finally given relevance to the SMEs and startups.
In the existing groups of SMEs and startups, an introduction of a completely new category of procurement has been provided. It has also increased localization.
In order to bring power in the locally designed, developed and manufactured products, this has been formally introduced.
In more simple and easy ways, these features had been presented in the earlier defense documents, and definitely, they now possess pride of position.
The emphasis on the process of localization is absolutely righteous as it considers India’s heavy reliance on imports for the purpose of defense preparedness. It is indeed a very crucial decisive factor in case of war.
India, being the largest importer of arms worldwide, has spent $51.3 billion in 2015 with around 80–90% of aircraft manufacturing materials that are being sourced from various foreign sources.
Small and medium enterprises, in such scenarios and cases, can play a huge role in making the nation self-dependent.
As per a survey conducted by an Information Technology firm working in the Small and Medium Enterprises sector, around 65% SMEs want a bigger role and significance in the defense sector.
The New category of “Buy Indian” Procurement
A new category brand called “Buy Indian (Indigenously Designed and Developed and Manufactured) that has been brought to recognition and introduced. It has been given importance over all other already existing categories that impart supreme momentum to “Make in India” campaign as also by promoting some in-house design facilities and capabilities.
If structured and implemented appropriately, the role that the domestic defense enterprises play, specifically in the private sector, is bound to increase manifold.
Higher and flexible local input requirements
The Government of India has enhanced native content requirements under the existing “Buy (Indian)” sector. It has also availed flexibility to authorities in charge in order to determine the local content requirements as per cases.
The newly introduced procurement measures would achieve great success and a long way, in meeting the key demand of local defense industry and the organization.
The IC requirement is strict and rigid. This is one major complaint from the small and medium enterprises considering the on-ground reality issues and a suggestive solution that necessary steps must be taken to get it in sync with the reality on the ground.
India’s local industry capability is unstable and difficult, specifically with regard to the critical aerospace items.
It is indeed a difficult task with present preparedness level to achieve 20 percent localization.
Local industry finds importance an relevance
The Ministry of Defence (MoD) has classified the “Make” projects into two segments. The Make-I that are government funded and Make-II that are industry-funded.
While the Government of India would mostly bear the cost for funding the first categories prototype development, the industry would firmly take the responsibility of the burden in the other category.
Funding for prototype development has also been increased by the government from 80 to 90 percent, with around 20 percent of the cost for advance payment.
The SMEs will also hold the initial right in order to develop a prototype for projects that are worth up to Rs. 10 crores.
Reputed industry players will be offered by these designated projects if the former are not interested in adopting them. This will enable the local industries to develop a decisive opinion.
As per the industry experts, such measures would further lead to enhanced collaboration between Indian and international players, thereby leading to bigger technology transfers and ultimately aiding and supporting the local industry to become competitive in nature at national as well as international level. These collaborations are not just helping to increase self-reliance and employment but also have been recognized to lead to multiple innovative technological spin-offs in national industry.
The new policy has positive impacts. It tries to include the defense establishment in the process of development. Thereby, instilling a sense of ownership among the forces that are well armed.
As per experts, these forces have the involvement that is quite critical to any of the successful developments of the defense equipment.
India can learn from other Asian powerhouses like Japan and South Korea
After World War II Japan was a country in complete disarray.
However, the rapid assimilation of the military technology and creation of the domestic arms production capacity has led to the development of civil commercial technologies that served the nation’s long-term goal to become a successful technology superpower. Japan went for quick, robust and widely spread industrialization.
Likely, South Korea’s defense exports raised from $144 million in 2002 to $3.6 billion in 2014, with the average annual gain of 31 percent over the past years.
Even after having a robust defense sector including small and medium enterprises, the nation is taking steps to improve its defense sector.
The committee that includes the subject-matter experts not only are providers of consultancy but also provide assistance in the field of marketing, bidding and several administrative procedures to the Small and Medium Enterprises.
Japan and Korea have performed exceptionally in their respective defense sector, as they have bold and powerful small and medium defense technology enterprises sector.