Assocham suggests steps to boost defence manufacturing

The Dollar Business Bureau Industry body ASSOCHAM (The Associated Chambers of Commerce of India), on Thursday, suggested key measures to drive growth in defence manufacturing, in the wake of the increased foreign direct investment (FDI) in defence from 26% to 49% and additional budget allocation of 9.87%. Among the several recommendations that were highlighted included a robust offset policy which would make it essential for foreign suppliers to buy a part of supplies from the domestic producers, thereby helping in the transfer of technology. It also said that significant takeaways could be taken from South Korea’s offset policy in this context, which has a system in place of prior approval from foreign contractors for transfer of the proposed technologies. Besides this, the chamber suggested that the R&D budget allocation to DRDO needs to be increased, especially since the present allocation at 6% of the overall defence budget and 0.85% of GDP is way too low. Another key recommendation was made for increased SME participation since these enterprises contribute as much as 20% of the indigenous content for defence equipment and hence could be a key driver to achieve the desired growth. The Union Budget 2015-16 has seen an increase of almost 10% in the defence budget to Rs 2.46 lakh crore this fiscal as compared to Rs 2.22 lakh crore previously. The objective, thus, has been to keep the thrust on the ‘Make in India’ initiative in order to bring down the over reliance on defence imports as well as to help in creation of employment opportunities. “Our Government has already permitted FDI in defence so that the Indian controlled entities also become manufacturers of defence equipments, not only for us, but for export. We are thus pursuing the Make in India policy to achieve greater self-sufficiency in the area of defence equipment, including aircraft,” Finance Minister, Arun Jaitley had said earlier in his Budget address.  

This article was published on March 07, 2015.