India can't afford to have a $20 billion defence import bill: Defence Minister

The Dollar Business Bureau

India's Defence Ministry is reconsidering purchase of French Rafale fighter jets (pictured above) and may opt for the lower-priced Russian Su-30MKI to cut defence expenditure

  Highlighting the importance of indigenisation of defence in India, Manohar Parrikar, Minister for Defence, Government of India, said today that a huge defence import bill to the tune of $20 billion is unaffordable and has undesirable consequences for the economy, development and unemployment in the country. Speaking at a seminar, “Gujarat: Preferred Hub for Defence Production”, held on the sidelines of Vibrant Gujarat 2015, Gandhinagar, Parrikar said that it is important to promote defence production in India for strategic reasons as well. “The country should not be dependent on defence imports,” he said. Parrikar also said that high end technology should be used in defence, but harped on the need to develop a clear strategy in defence manufacturing and procurement. “After spending crores in curtain projects the goal post suddenly shifts. Therefore, there is need for total overhaul in conceptualising and thinking with regard to defence manufacturing and procurement,” he said. The government is planning a strategy on indigenisation of defence production and plans to engage Gujarat and other state governments to kick-start an ambitious defence production program. Under the program, the Ministry plans to come up with a list of defence items that could be manufactured in India by April 2015 and add more items on the list with time. India has the 3rd largest armed forces in the world, but around 60% of requirements is met by imports. According to Stockholm International Peace Research Institute (SIPRI), India is the world’s biggest arms importer with imports of major weapons increasing by over 110% between 2004-08 and 2009-13. Russia and USA are the biggest suppliers of defence equipment to India, with the former accounting for around 70-75% of India’s defence imports. Recently, G. Mohan Kumar, Secretary (Defence Production) had announced that the government plans to announce around 10 defence projects every year under its Make Policy. “In the current situation, indigenisation has become very important as we cannot have a defence system which is depending on imports all the time,” Kumar said. He also hinted that that the new Defence Procurement policy is likely to be a simple document of around 25-30 pages. Mired in several controversies, India’s defence manufacturing sector remained closed for several years post liberalisation reforms in the nineties. However, to reduce the dependence on imports, the government had opened the defence manufacturing sector up to 100% for Indian private sector in May 2001 and allowed FDI up to 26%. Last year, the government allowed FDI in the defence sector to up to 49% through FIPB route and above 49% through Cabinet Committee on Security (CCS) as a part of Prime Minister Narendra Modi’s "Make in India" initiative.    

This article was published on January 12, 2015.