Sustained business reforms over the past several years have helped India jump 14 places to 63rd position in this year’s World Bank “Ease of Doing Business” (EDB) rankings. For an economy as large and complex as India’s, this is a unique achievement. The reforms agenda at the central and state levels have helped create a conducive environment for building capabilities to “make more in Indi”. In such a framework, global players will get a seamless platform to work with Indian counterparts for manufacturing and delivery. This has special relevance for the development of indigenous defence manufacturing capabilities. Indigenisation in the defence sector has been a key focus for India over the past decade. Various global and domestic factors have, however, been a deterrence. India has the second largest standing army in the world and has been one of the largest importers of arms in the past decade. There has also been sustained progress in home-grown military solutions including the light combat aircraft (LCA) Tejas, the BrahMos medium range cruise missile and the main battle tank (MBT) Arjun. There is also an important lesson from India’s successful indigenously built space programme. It is helping to serve other countries, which is now earning dividends for the Indian Space Research Organisation (Isro) as well. This can well be replicated in the defence sector.
With $130 billion budgeted till 2025 for the modernisation of the armed forces, India has the firepower to move towards self-reliance. What is encouraging is the new, growing role for the private sector in defence. The share of private sector in defence production has grown to about 20 percent already. Hence, the significance of building capabilities through collaboration is greater than ever before.
There are several examples of successful public-private and private private partnerships in the sector already. Companies such as Bharat Forge, Godrej & Boyce, the Tata Group and startups are already making notable contributions in this space. Similarly, Rolls-Royce’s partnerships have been with government agencies such as the Indian Air Force and public sector companies such as Hindustan Aeronautics Ltd. Such partnerships between global and Indian suppliers are helping build capabilities to create an ecosystem of suppliers that matches global quality and delivery standards. But 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 comprising of offsets and work being passed on to local companies.
It’s time to take a radically new look at this approach. India today has the width and weight to invest in co-creation programmes through collaboration with willing global players to co-develop relevant technologies and intellectual property (IP) in critical areas. Such a programme would require a long-term investment commitment. But the fruits can be rewarding. With a co-owned IP in areas of strategic importance, not only can India commercialise production locally, but also use its base to become a global supplier and exporter of defence technologies. A thriving local industry powered by India’s own technology will provide an apt platform for its skilled and ambitious workforce. Global players with stakes in science and development usually find opportunities around innovation exciting. So, a co-development and co-creation led strategy would be attractive to global players at both government-to-government as well as government-to global private sector level.
A shared R&D programme will distribute the risks among parties. And if the outcome is breakthrough innovation, the rewards could be significant for all. There are several examples of such a model thriving in this part of the world, such as the Britain-Japan co-development programme for joint air-to-air missiles and the Britain-Singapore collaboration to co-develop new technologies that will power the future of aircraft propulsion, better counterterrorism measures and a more efficient military logistics system.
It is with co-creation and co-development programmes that ‘Make in India’ will find its true calling. When India as a partner has a stake in the manufacturing IP, its commercialisation will be a naturally corollary to building of a local supply chain and an entire industry. Improvement in ‘ease of doing business’ ranking is another indicator that India is on the right direction on the policy front and providing the right platform for ideas such as co-creation. At the same time, leveraging fruitful partnerships will fuel capability building of the ecosystem, and India will truly become the home base for manufacturing for India, and for the world. First published in THE ECONOMIC TIMES, INDIA