India Announces Measures to Cut Defence Imports

India plans to strengthen its “Make in India” initiative by building its own military equipment and curbing imports, under its whopping $265.2 billion (INR 20 lakh crore) economic package.

The package, equivalent to 10% of India’s GDP, includes both fiscal and liquidity measures to make India self-reliant under the “Aatmanirbhar Bharat Abhiyan.”

On Saturday, Finance Minister Nirmala Sitharaman stated the FDI limit in defence production will be raised to 74% from 49% for FDI through the automatic route.

“The FDI limit in the defence manufacturing under automatic route has now been raised from 49% to 74%. This decision will unleash the true potential of Indian defence production capabilities through ‘Make in India’. The announcements made today will prove to be a Game Changer,” said Rajnath Singh, defense minister of India.

The reforms include imposing ban on importing certain weapons and corporatization of defence ordinance factories.

The finance ministry announced to notify a list of weapons or platforms that will be banned for imports with year-wise timelines. This would mean that India will have to compulsorily develop technology for those defence systems/platforms.

The minister also announced a timebound defence procurement process and faster decision making by setting up of a Project Management Unit (PMU) to support contract management.

This will also include a “realistic” setting of General Staff Qualitative Requirements (GSQR) of weapons/platforms and overhauling of trial and testing procedure.

“Sometimes unrealistic quality requirements are established and quite a lot of time is spent in searching for suppliers who will meet all those requirements, you will end up with just one supplier and since buying from a single supplier is not permitted, you do the entire circle all over again,” said Sitharaman.

Reforms include indigenisation of imported spare parts and separate budget provisioning for domestic capital procurement to reduce the “huge” defence import bill.

The government also reiterated its plan to corporatize Ordnance Factory Board (OFB) which has 41 ordnance factories functioning under it.