Syllabus
GS Paper 3 – Government Budgeting, Achievements of Indians in Science & Technology; Indigenization of Technology and Developing New Technology. Various Security Forces & Agencies & Their Mandate
Context
As Budget 2024-25 is currently in the planning stages, discussing India’s defense sector is pertinent, especially in the context of allocating funds for defense
Source
The Hindu | Editorial dated 21 – December 2023
India and its Defence Sector
- India’s Defence sector, the world’s second-largest armed force, stands on the brink of a transformative era.
- The Government’s ‘Aatmanirbhar Bharat’ initiative has designated Defence and Aerospace as key focus areas.
- A robust push is underway to establish indigenous manufacturing infrastructure, supported by a strong research and development ecosystem.
- According to the Stockholm International Peace Research Institute (SIPRI), India ranked as the third-highest military spender globally in 2021.
- With a record-breaking global defense expenditure of $2.1 trillion, India trails only the United States and China in military spending.
Stockholm International Peace Research Institute (SIPRI) annual report
- India’s Dominance in Global Arms Imports:
- India maintained its position as the world’s largest arms importer from 2018 to 2022, holding a significant 11% share of global arms imports.
- Evolution of India’s Arms Suppliers:
- Russia remained India’s largest arms supplier, but its share decreased from 64% to 45%, with France emerging as the second-largest supplier at 29%, followed by the U.S. at 11%.
- Drivers of India’s Arm Imports:
- India’s tensions with Pakistan and China continue to be major drivers of its demand for arms imports.
- Factors Influencing Drop in Arm Imports:
- The decline in arms imports by India can be attributed to factors such as the country’s slow and complex arms procurement process and efforts to diversify arms suppliers.
- India’s Role as an Arms Supplier:
- India became the third-largest arms supplier to Myanmar, accounting for 14% of its imports, following Russia and China.
Defence Budget Highlights (2023-24):
- Overall Allocation:
- The Union Budget allocates Rs 5.94 lakh crore for Defence in 2023-24, reflecting a substantial 13% increase from the previous year.
- Operational Allocations:
- Non-Salary revenue outlay for Armed Forces sees a remarkable 44% jump, reaching Rs 90,000 crore, emphasizing the need for combat capability enhancement and critical operational needs.
- Defence Pensions:
- A significant allocation of Rs 1.38 lakh crore is dedicated to Defence Pensions, underlining the government’s commitment to the welfare of retired personnel.
- Capital Outlay for Modernization:
- Capital outlay for modernization and infrastructure development experiences a substantial increase to Rs 1.62 lakh crore, marking a 57% rise since 2019-20.
- Border Roads Organization (BRO):
- The Capital Budget for BRO witnesses a notable 43% boost to Rs 5,000 crore, aimed at strengthening border infrastructure, including strategic tunnels.
- DRDO Allocation:
- A 9% increase in allocation to DRDO, totaling Rs 23,264 crore, emphasizes the focus on research, development, and technological advancement in the Defence sector.
- Innovation Funding:
- iDEX receives a notable boost with Rs 116 crore, reflecting a 93% increase over the previous year, fostering innovation in the Defence Industrial ecosystem.
- Defence Pension Budget Increase:
- The Defence Pension Budget sees a remarkable 15.5% jump, reaching Rs 1,38,205 crore, with a focus on meeting the requirements of One Rank One Pension (OROP).
Major Government Interventions
- Increased Capital Allocations:
- Capital allocations for modernization and infrastructure development of Defence Services raised to INR 1,62,600 Cr, marking a 6.7% increase over FY 2022-23.
- Industry Funding Boost:
- The industry receives INR 5.94 Lakh crore in Budget 2023-24, experiencing a significant 13% jump from the previous year.
- Turnover Target and Licenses Issued:
- Ministry of Defence sets a target of achieving a turnover of INR 1.75 lakh crore in aerospace and defence manufacturing by 2025, with 606 industrial licenses issued to 369 companies in the Defence Sector till April 2023.
- Government’s Supportive Policies:
- To support the domestic defence industry, the government focuses on transparency, predictability, and ease of doing business, implementing de-licensing, de-regulation, export promotion, and liberalizing foreign investment up to 74% through the Automatic Route and 100% by Government Route.
- Positive Indigenisation Lists and FDI Enhancement:
- Department of Military Affairs (DMA) releases four Positive Indigenisation Lists, comprising 411 military items, promoting export and liberalizing foreign investments. FDI in the Defence Sector enhanced up to 74% through the Automatic Route and 100% by Government Route.
- Defence Industrial Corridors:
- The government announces two dedicated Defence Industrial Corridors in Tamil Nadu and Uttar Pradesh, acting as clusters for defence manufacturing, leveraging existing infrastructure and human capital.
- Innovation Support Schemes:
- Government schemes like iDEX (Innovations for Defence Excellence) and DTIS (Defence Testing Infrastructure Scheme) foster innovation within the Defence & Aerospace eco-system.
- DRDO’s Technology Development Fund (TDF):
- DRDO’s TDF supports MSMEs & Startups in indigenizing cutting-edge defence technologies, with 164 technologies being indigenized, $30.8 Mn funds sanctioned, involving 1886 experts and 5270 companies.
- Atmanirbhar Bharat Initiative:
- Under the Atmanirbhar Bharat Initiative, Defence Public Sector Undertakings (DPSUs) indigenize 72 out of 214 items from the Positive Indigenisation List well before their original timelines, with the remaining 142 items targeted for indigenization by December 2022.
- SRIJAN Portal for Indigenization:
- SRIJAN portal launched to promote indigenization, with 19,509 defence items uploaded for indigenization as of April 2022.
Indigenization of Defence Sector
- Definition of Defence Indigenization:
- Defence Indigenization is the strategic process of developing and manufacturing defence equipment within the country, aimed at reducing import dependency and achieving self-reliance.
- Major Players in Atma Nirbhar Bharat Vision:
- The Defence Research Development Organisation (DRDO) and Defence Public Sector Undertakings (DPSUs) play a crucial role in driving India’s self-reliance vision.
- Significant Milestone in 1983:
- Approval of the Integrated Guided Missile Development Program, developing missile systems like Prithvi, Akash, Trishul, Nag, and Agni Ballistic Missiles.
- Importance of Indigenisation for India:
- Essential for preparedness against hostile neighbors like China and Pakistan.
- Strengthens India’s geopolitical stance as a net security provider.
- Drives progress in defence technology, cascading positive effects on other industries.
- Mitigates the economic drain caused by heavy spending on defence imports.
- SRRV’s Self-Reliance Plan (1990):
- Formulation of a 10-year self-reliance plan with a self-reliance index (SRI) target, aiming to increase indigenous content in total procurement expenditure from 30% in 1992-1993 to 70% by 2005. This target remains unmet.
- International Collaborations:
- India-Russia agreement in 1998 for the joint production of Brahmos supersonic cruise missiles.
- Partnerships with countries like Israel and France for various defence projects.
- Challenges to Indigenisation Plan:
- Deficiency in Defence Planning: Lack of comprehensive planning for defence requirements.
- Institutional Capacity Issues: Insufficient capacity for timely policymaking.
- Infrastructure Constraints: Lack of infrastructure for scaling up production and logistical support.
- Dispute Resolution Deficiency: Absence of a dispute settlement body to resolve issues.
- Land Acquisition Restrictions: Challenges arising from restrictions on land acquisition.
Challenges in India’s Defence Sector:
- Imports Dependency:
- India, despite being the third-largest military spender, remains the second-largest arms importer, indicating a significant dependency on foreign sources for military equipment.
- Heavy reliance on imports in the defence sector, leading to delays due to changing geopolitical circumstances.
- Pending deals, including the acquisition of 12 Sukhoi-30MKI aircraft and 21 MiG-29 fighter jets for the Indian Air Force, contribute to the import dependency.
- Poor Military Modernization:
- Military modernization efforts are hampered by budget allocations where day-to-day expenditure, including salaries and pensions, outstrips the capital outlay for modernization.
- In the 2020-21 defence budget, almost $18 billion was allocated for pension expenditure out of the total $63 billion.
- Private Sector Participation:
- Limited private sector involvement in the defence sector due to an unfavorable financial framework, hindering modern design, innovation, and product development.
- The lack of conducive conditions restricts the growth of private enterprises in defence production.
- Technology Related challenges:
- Inadequate design capability, low investment in research and development (R&D), and the inability to manufacture major subsystems and components hinder indigenous manufacturing.
- Neglect of Higher Defence Structures:
- Successive governments have overlooked the need for reform in higher defence structures, leading to a disconnect between Chiefs of Staff and the national security planning structure.
- Absence of a Coherent National Security Strategy:
- The lack of a well-articulated National Security Strategy poses a concern, forcing individual services to formulate their concepts and doctrines, potentially conflicting with national security policies.
- DRDO and Defence Sector Overhaul:
- The Defence Research and Development Organization (DRDO), along with its 50 labs, five defence PSUs, four shipyards, and 39 ordnance factories, require significant revamping.
- There is an urgent need to encourage the private sector’s active involvement in arms manufacturing to reduce India’s reliance on imports, currently standing at 65%.
- Procurement Procedures:
- Cumbersome arms procurement procedures need refinement to expedite acquisitions and minimize corruption.
- Critical projects, including submarines, howitzers, fighters, helicopters, night-fighting capabilities, air defence weapons, and small arms acquisitions, have been stalled due to bureaucratic apathy.
- Lack of Clarity on Indigenous Defence Production:
- Limited high-technology transfers and negligible enforcement of offset obligations of foreign vendors, as revealed by a CAG report.
- The absence of a clear roadmap for indigenous defence production and technology transfer hinders self-reliance efforts.
- Challenges in Stakeholder Coordination
- Overlapping jurisdictions between the Ministry of Defence and the Ministry of Industrial Promotion hinder defence manufacturing capability.
- The lack of a cohesive approach and collaboration among stakeholders contributes to inefficiencies in the defence production ecosystem.
What Must be the Way Forward?
- Private Sector Engagement:
- Facilitate private sector entry into defence production with a focus on sustainable design and development.
- Revitalize and regulate entry points to meet the Indian Armed Forces’ evolving needs.
- Defence Industrial Corridors (DICs):
- Establish dedicated DICs across the country to harness the potential of MSMEs and DPSUs in defence manufacturing.
- Extending corridors to facilitate smooth transit of raw materials and optimize the manufacturing ecosystem.
- Inclusive Policy Making:
- Include defence entrepreneurs in policy-making processes to bridge qualitative and quantitative gaps.
- Streamline procurement processes and collaborate with new entrepreneurs for effective policy implementation.
- Global Market Penetration:
- Promote exports of Indian defence products by simplifying export authorization procedures.
- Launch the Defence Exim Portal to facilitate online mechanisms and targeted outreach efforts for export promotion.
- Economic Strengthening:
- Indigenization of the defence sector will boost the economy, creating employment opportunities and reducing import dependence.
- Strategic independence in defence will be achieved through self-sufficiency, exemplified by the corporatization of the OFB.
- Defence Investor Cell:
- Strengthen investment in defence by creating a Defence Investor Cell for streamlined communication and support.
- Integrate the SRIJAN portal with the Investment Cell to enhance accessibility for entrepreneurs.
- Arbitration and Dispute Resolution:
- Establish a permanent arbitration cell to address disputes and objections promptly, ensuring a smooth process.
- Ensure a level playing field for the private sector alongside DRDO, DPSU, and OFB.
- Enhanced Export Capability:
- Aim to increase export capability to attract funding for indigenization efforts.
- Provide administrative and financial autonomy to DRDO and satellite organizations for increased efficiency.
- Infrastructure and Technology Enhancement:
- Enhance in-house design and testing infrastructure.
- Provide software support for artificial intelligence and cybersecurity to stay technologically competitive.
- Policy Continuity and Bipartisan Support:
- Ensure a continuum in policy-making to sustain momentum.
- Secure adequate defence budgeting, making it election-proof through bipartisan statesmanship.
- National Security Imperatives:
- Analyze national security imperatives independently of electoral considerations.
- Acknowledge external threats, such as China’s belligerence, and allocate necessary resources for defence preparedness.
Practice Question
Discuss the significance of indigenization in the defence sector for India’s economic strength and strategic independence. What measures can be taken to promote sustainable design and development in defence production?