Privatisation creates opportunity, but the industry still needs government husbandry
If Vijay Kelkar’s recommendations are taken to heart, India could see the emergence of some private-sector defence contractors in the next few years.
India has some key economic and military trends going in its favour. Globalisation has provided a shot in the arm for its manufacturers, especially in the automobile sector, who have not only learnt advanced production techniques but have also become part of global supply chains. The old mantra of self-reliance — which meant trying to maximise the number of indigenous components — is not as relevant today as it once was. India’s challenge will be to manage and master a reliable, resilient global supply chain that will not only ensure that the assembly lines remain function in all circumstances, but also give it a competitive edge in the international defence market. Some niches where Indian companies can secure competitive advantage include manufacturing of components, providing outsourced manufacturing and upgrading Russian hardware.
Major powers are rejigging their weapons systems and doctrines towards strategic power projection, network-centric warfare and special operations; a trend that is becoming visible in India. That involves strengthening the navy and missile systems, integrating weapons systems and C4ISR. While conventional wisdom has it that India’s defence contractors would be offshoots of heavy manufacturers like Larsen & Tuobro, Tata and Mahindra & Mahindra, the list could well include the offshoots of Wipro and Infosys. The quickest successes of India’s defence industry privatisation may well be in IT, provided of course, that the Indian defence ministry puts its money where its mouth is.
As Kaushik Kapisthalam has pointed out in his defence of DRDO the vested interests that lobby against greater domestic procurement are traditional foreign suppliers (Russia) and their long-established Indian advocates. Many of them are former military and civilian officials who wield influence in New Delhi. By creating a domestic constituency for domestic procurement, privatisation creates the environment where these lobbyists can be challenged. More generally, such competition can give the Indian armed forces a much better deal than they are getting now, besides of course, giving taxpayers the best value for their money.
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