If we need to accelerate the pace of indigenisation to the aspired scale, we need a quantum leap in the way it is approached. So far, the primary approach to indigenisation has been through import substitution. This gave birth to an offset policy that, in turn, triggered partnerships between global and Indian companies. However, this approach has limitations and is dependent on imports to feed into the value chain in the form of offsets or work being passed on to local companies. Co-creation with willing global partners with a goal to not only serve India but the world, will be key to leveraging the potential of the Indian defence ecosystem.

Photo Credit : Rolls Royce,

As India sets its sights firmly on global growth, there has been much activity across several industry sectors to be a part of the growth trajectory. The pandemic has served as a time-out zone for India and the country must prepare harder to meet increasing demand from India and from the world. ‘Atmanirbhar Bharat’ is an exemplary clarion call to propel India’s manufacturing prowess during this time. The manufacturing sector can not only boost the GDP, increase money circulation in the market and generate jobs, but also drive export and revenue growth in the long run. 

With renewed focus on increasing the manufacturing sector’s share of India’s GDP, the government has announced aid and incentives to boost the sector and to increase export potential. However, India has faced stiff competition from other countries as several global players shifted their production hubs out of China. While China’s advantage was in building the cost arbitrage, India offers more in value. The services sector is a clear success story of building differentiation to capture the global market, and India can replicate this success in manufacturing. It will be to our advantage to build a value arbitrage proposition to differentiate and participate in the global value chain. 

Make in India, for the world

At the forefront of the clarion call to ‘make in India for the world’, is the defence sector. India has an opportunity to realise its true growth potential through a cohesive effort by government and industry. By continuing to create large infrastructural programmes, appropriate reforms aimed at improving ease of doing business, building more partnerships for co-creation opportunities, creating a highly-skilled talent pool, adopting technology intelligently and moving up the manufacturing value chain,  a new India can define its value arbitrage to emerge stronger and more resilient than ever.

With nine defence public sector undertakings, 41 ordnance factories, an exclusive research organisation and more than 100 private companies, India undoubtedly has a huge defence industrial base. The sector is critical from the perspective of national security and given the government’s goal of self-reliance, it provides an excellent opportunity to build and/or scale-up an industrial base centred on manufacturing. 

With a $130 billion budget spread over the next few years for the modernisation of the armed forces, India has the firepower to move towards self-reliance by strengthening its defence manufacturing.

Role of private players

Indigenisation in the defence sector has already been in focus over the past decade. There has been sustained progress in developing military solutions in India, for India including the light combat aircraft (LCA) Tejas, the BrahMos medium-range cruise missile and the Arjun main battle tank (MBT). What is encouraging is the increasing participation from the private sector, evidenced by the ‘20 per cent and growing’ share of the private sector in defence production. Hence, the significance of building capabilities through collaboration is greater than ever before. 

If we need to accelerate the pace of indigenisation to the aspired scale, we need a quantum leap in the way it is approached. So far, the primary approach to indigenisation has been through import substitution. This gave birth to an offset policy that, in turn, triggered partnerships between global and Indian companies. However, this approach has limitations and is dependent on imports to feed into the value chain in the form of offsets or work being passed on to local companies. 

Co-creation with willing global partners with a goal to not only serve India but the world, will be key to leveraging the potential of the Indian defence ecosystem. 

Differentiation is key to compete globally 

India needs a co-development and co-creation led strategy to create ‘differentiation’ if it is to compete for a serious share of the global value chain. This would attract global players by offering benefits at government-to-government levels. There is significant opportunity for India to leverage the technology advantages that global players bring to ‘Create in India’, with India co-owning the Intellectual Property (IP) in areas of strategic importance. 

‘Creating in India’ in collaboration with global players will catapult India’s vision to create a strong ecosystem and commercialise production locally, and to use this base to boost global supply chain and export capabilities. A thriving local industry powered by India’s own technology will also provide an apt platform for its skilled and ambitious workforce.

The reforms agenda at the central and state levels has helped create a conducive environment for building capabilities to ‘make more in India’, and the government’s focus on ‘ease of doing business’ is further aiding this development. 

India stands at the crossroads of its economic growth, and the time is now right for it to pursue indigenous design and manufacturing for its defence sector through partnership, co-production and co-creation. This will also build a robust defence manufacturing base that contributes notably to the economic growth of the country. 

Kishore Jayaraman, President- India & South Asia, Rolls-Royce. Views are personal.