NEW DELHI — India made few industrial partnership announcements for upcoming defense projects at Defexpo last week, raising concerns that the "Make in India" initiative has stalled.
Policymakers in India's Ministry of Defence (MoD) don't see how the Make in India program will move forward, which could cause a slowdown in the creation of new defense manufacturing hubs in the country, according to a source with the MoD.
The thrust of the Make in India policy is to reduce weapon imports from 70 percent of acquisitions to about 50 percent in the next 10 years as India plans to spend $150 billion on equipment in the next 15 years.
"India needs to award big-ticket defense contracts on [a] fast-track basis in order to bring in investments and technology," the source said.
However, another MoD official said the new procurement guidelines of Indian Prime Minister Narendra Modi's government "have introduced a new framework to create a robust military-industrial complex in India."
"Unless we are given defense contracts, we will not make any investments," said a CEO of a European defense company in India, who spoke on the condition of anonymity.
"The [Indian ] government has to give us assured, long-term defense orders," said the CEO of a domestic private company who also spoke on the condition of anonymity. The CEO added that "the decision-making must be faster and transparent to boost industrial partnerships."
"Under the new policy, Indian companies will now be prime and lead contractors for big-ticket defense projects, but it is unclear how foreign companies will provide critical technologies without holding a majority stake," he said.
In addition, Indian suppliers find it tough to be integrated into global aerospace and defense (A&D) supply chains due to [their] very high profitability expectations, according to Manfred Hader, global head for Roland Berger's Aerospace and Defense Practice Group.
India's specific product partnerships will be a prerequisite to win contacts for domestic and foreign companies, Hader said.
From the perspective of a global original equipment manufacturer operating in India, the real challenge today is to align campaign strategy and spell out medium- and long-term commitments for India, said Rahul Gangal, a partner in Roland Berger's New Delhi office.
Gangal noted that repeated tender retraction and sustained delays in the awarding of large programs are causing the international A&D community to re-evaluate its approach in India.
An executive of an industry lobby agency said India's substantial A&D manufacturing plans will require multiple improvements in manpower and substantial investments in human capital and training. "This would require a combined impetus from government as well as industry. Currently, this is a major medium-term derailment risk for Indian A&D manufacturing."
For the A&D industry in India to step up and realize the Make in India thrust, there will need to be substantial fiscal and tax incentives for both developers as well as units that create such an ecosystem, Gangal said.
The lobby agency executive added that defense business in India is slated for the long haul.
Email: vraghuvanshi@defensenews.com
Vivek Raghuvanshi is the India correspondent for Defense News.
