The Defence Ministry insists that Indian private firms desist from offering imported products to the armed forces with a ‘Made in India’ tag but produce equipment indigenously. Rules for India-based joint ventures with foreign partners will be relaxed, but 50 per cent indigenous content will be expected.

Even over a decade after the Indian Government opened the defence industry to the private sector with participation up to 100 per cent and foreign direct investment (FDI) up to 26 per cent, the level of indigenisation continues to be abysmally low. Indian manufacturers are assembling subsystems for the foreign players and are dependent on imports for raw materials. The ‘real’ indigenous content has actually progressively reduced from 45 to 36 per cent. With high import duties, the end product remains costly. The defence sector is yet to attract FDI and there are suggestions within the government to raise the cap from 26 to 49 per cent. In the first ten years since 2001, the country has received just $4 million ( Rs. 22 crore) as FDI as against $180 billion ( Rs. 9,90,000 crore) invested in the rest of the Indian economy.

As per the Stockholm International Peace Research Institute (SIPRI), in the last five years, China replaced Britain to become the fifth largest weapons exporter. China’s foreign sales of conventional weapons surged 162 per cent, constituting five per cent of global exports. China has reduced dependence on imports and has exported indigenously developed military equipment such as the JF-17 combat jets to Pakistan. Fifty-five per cent of China’s defence exports went to Pakistan. The US with 30 per cent world market share and Russia with 26 per cent are the apparent leaders. In the same period, importing 12 per cent of the world’s total, India replaced China as the number one arms importer not befitting an aspiring global power. The Arms Trade Treaty passed by the United Nations General Assembly in April 2013 is a setback to India’s interests as a major arms importer. It is aimed at regulating global trade in conventional weapons by linking sales to human rights record of the buyer.

Defence Minister A.K. Antony has repeatedly stated that India still imports about 70 per cent of its military requirements. This makes India vulnerable to disruption in supply at critical times and procurement scandals. He has been personally driving the case for indigenisation of defence production and firmly believes that ‘Made in India’ was the only solution against corruption. He has advised the armed forces, the government, the Defence Research and Development Organisation (DRDO) and the industry to come together in mission mode so that India can achieve a high level of indigenisation in a reasonable time frame and that import should be the last resort. He also promised to have a ‘second look’ at the defence production and procurement policies. Finally, in a Defence Acquisition Council meeting on April 22, 2013, decisions were taken to infuse greater efficiency in the procurement process and create a genuine levelplaying for the Indian industry. ‘Buy Indian’ will henceforth be the first option and ‘Buy Global’ the last. It was decided to make public the document outlining the technology perspective and capability roadmap for the next 15 years. This will bring clarity to the Indian industry for planning infrastructure and investment.