Make in India

It took plain-speaking from Olivier Andries, the CEO of the French engine manufacturer associated with the Rafale fighter jet, to drive home the point that the ambitious Make in India initiative — launched with fanfare in 2014 — has a long way to go in the defence sector. Andries, who heads multinational Safran, the maker of M88 state-of-the-art engines, told Defence Minister Rajnath Singh that the company planned to invest about $150 million in India towards training and maintenance, but was apprehensive of the country’s tax and customs ‘terrorism’. He sought support on easing tax norms for a business-friendly environment. Rajnath had to assure him that India was committed to providing the right climate for investments. The issues red-flagged by the Safran chief prompted the Defence Minister to later tell a delegation of CEOs representing France’s defence industry majors that India was open to ‘any further tax rationalisation’ that may be required to encourage Make in India in this sector.

Even though India has significantly improved its global Ease of Doing Business ranking from 142 to 77 in the past over four years, it is still way behind other Asian nations like Singapore, South Korea (both in the top five), UAE (11), Japan (39) and China (46). In her Budget speech, Finance Minister Nirmala Sitharaman had announced that since defence modernisation and upgrade was a national priority, the import of equipment not being manufactured in India was being exempted from basic customs duty. Many more such confidence-building measures are needed to attract foreign investors.

The transfer of technology is a must for achieving the lofty goal of self-reliance in the defence sector. Last year, the government had unveiled the strategic partnership model, which envisages a long-term tie-up of Indian entities with global Original Equipment Manufacturers to set up domestic manufacturing infrastructure and supply chains. Amid the mixed response to this policy, the private sector has been demanding a level playing field and a transparent bidding process. Unless the bottlenecks are removed, India — now the fourth largest defence spender in the world — will continue to depend heavily on imports in the high-stakes military arena.