India's economic progress has increased it’s say in the world order where India is being considered as an emerging superpower. It’s the ninth largest country in world in terms of nominal GDP; India has the third largest purchasing power in the world. This has certainly been reflected its recent imports for the defence industry. In the period 2006 to 2010 India surpassed China as the world’s largest importer of weapons systems, indicating India’s intention to modernize its military capabilities and efforts toward making its boundaries secure and projecting its capability to outside world. The crucial issue here is that not only weapon & defence technology imports drain country’s foreign exchequer but also increases the dependence of our defense technology on other nations.
India’s spending on defence as a share of its GDP has remained relatively steady at 2.5 to 3.0 percent. Consequently, India’s defence budget has grown by some 64% (in real terms) since 2001 reaching $36.3 billion in the 2011–2012 and $41 billion in 2012-13 (an increase of 17% from the last year). Approximately 40 percent (some $14.5 billion) is allocated to the defense capital outlay budget, which funds for arms procurements, construction and maintenance & installations additional infrastructure, and other military equipment modernizations. Indian Air Force has experienced a 6 to 7 percent growth in its share of the capital outlay budget over the past decade, while the Indian Army and Navy have seen their shares decrease. The Air Force also receives the major share, some 40 percent of the current capital outlay budget, while the Army and Navy receive 25 and 20 percent, respectively (the remaining is spent on R&D and military production).
Looking at the defence budget one can discern that around 70% of the budget is utilized for paying for imports and the remaining 30% is used for indigenous capability building, defence research and procurement. This is indicative of our dependence on foreign imports and under allocation of resources for indigenous defence technology development. The argument of indigenous R&D in defence technology is Janus faced. R&D in defence technology is predominantly conducted by, and limited to, the government organizations like DRDO, HAL, NAL etc; but the efficacy and efficiency of these organizations is deplorable, thereby leaving no other alternative but to procure the required technology from abroad. Contesting this it can also be argued that the resource allocation for defence research is very conservative; in fact budget allocation for defence R&D has decreased from 10,539 crores in 2011-12 to 5,995 crore rupees in 2012-13 (43.11% decrease over the last budget) deeply hampering our indigenous R&D. It seems that indigenous R&D in defence technology is a low priority issue for the government; whereas lack of funds could be a pertinent impediment to the ability of the research organizations to deliver.
Boosting indigenous defence research to come up with advanced defence technology with shorter cycle time requires structural reforms. We not only need to spend more on R&D but also need to improve support infrastructure and be more open minded about public-private-partnership (PPP) in the defence sector. There are many important issues which have to be addressed in this context. It’s an imperative to build a quality research network for defence research comprising of government research organizations, universities and other research institutes; defence research is too important to be left for government organizations alone. Why not sponsor defence research projects in competent educational institutions in India? Having spent some time with HAL Bangalore, what comes as a critical observation is the extent to which our government research organizations lack professional management. Research organization need to be managed much more professionally than they are; this will require intensive focus on project management, time-bound objectives and performance dependent appraisals.
For these advancements it is critical to invest more in education and research based infrastructure, such as well-equipped labs, operational with high-speed computational computers and testing facilities, and more industry exposure. Analyzing the present scenario, India currently is home to 50 laboratories all over the country predominantly held by government, most of them under Defence & Research Development Organization (DRDO), while others are associated with Indian Space And Research Organization (ISRO). Labs in other educational institutes such as IITs and IISc seem more associated with commercial based research rather than core defence research. This limits the participation from private sector institutions and educational institutions in coming up with innovative ideas in the field of defence technology development.
To boost indigenous defence research India must look forward to partnership with the private sector. To address the security concerns, government can open up the defence sector to private investment gradually or limit private participation to only domestic private players, but private participation is essential. More vigorous private participation in defence research will not only reduce pressure on the government to allocate resources, but will also bring about more ideas, innovative technologies, timely project completion and as a consequence a more robust indigenous defence development.
Currently there are a number of regulatory barriers for entry of private players, making it difficult for small and medium enterprises (SMEs) to enter the market. This is largely due to the high costs of tendering processes, such as in-country trials and obligations for Transfer of Technology. One of the major impediments is the necessity for No Cost No Commitment Trials which can take several years and consequently small players with sophisticated expertise do not have the resilience to survive this risk. Also the tendering process for defence equipment in India is not transparent; and is replete with procedures and red-tapeism. Such entry barriers discourage prospective foreign or domestic private players to invest in defence R&D in India, as this could lead to irrecoverable sunk costs, and might not lead to any returns in future.
There is a shift in policy stance in this matter. Apprehending the gravity of these issues Ministry of Defence (GOI) released the first ever Defence Production Policy in 2011. This document greatly emphasizes on indigenous production and advocates relaxation of norms and policies, which earlier inhibited private small and medium enterprises entering into defence sector, instilling confidence in them so as to foster public-private-partnerships. But a lot remains to be done for indigenous defence sector development by duly prioritizing R&D investment and related infrastructure and opening up possibilities for private sector participation in the same.
The Writer is an Aerospace Engineer working at the Institute for Defence Studies and Analysis, (IDSA) New Delhi in the Strategic Technologies Division.