What is Make in India in Defence?
Historical Background
Key Points
11 points- 1.
The Defence Procurement Procedure (DPP) is the cornerstone of Make in India in Defence. It outlines the rules and regulations for acquiring defence equipment. The DPP prioritizes procurement from Indian vendors, giving them a competitive advantage over foreign suppliers. This encourages domestic companies to invest in defence manufacturing and technology.
- 2.
One key aspect is the offset policy. This requires foreign companies winning defence contracts above a certain value (typically ₹2000 crore) to invest a portion of the contract value back into the Indian defence industry. This can be done through technology transfer, local manufacturing, or sourcing components from Indian companies. The aim is to build domestic capabilities and reduce dependence on foreign suppliers.
- 3.
The government has established defence industrial corridors in Uttar Pradesh and Tamil Nadu. These corridors provide a conducive ecosystem for defence manufacturing, with infrastructure, skilled manpower, and access to markets. The corridors aim to attract investment and promote regional industrial development in the defence sector. For example, the Uttar Pradesh Defence Industrial Corridor has attracted investment commitments worth thousands of crores.
- 4.
The Strategic Partnership (SP) model aims to create globally competitive Indian defence companies. Under this model, the government selects a few Indian companies as strategic partners and encourages them to collaborate with foreign technology providers to manufacture advanced defence equipment in India. This fosters technology transfer and helps Indian companies develop indigenous capabilities.
- 5.
The Innovations for Defence Excellence (iDEX) initiative promotes innovation and technology development in the defence sector. It provides funding and mentorship to startups and MSMEs working on innovative defence technologies. iDEX aims to create a vibrant ecosystem of defence innovation and foster self-reliance in defence technology. For example, iDEX has supported the development of drones, AI-powered systems, and advanced materials for defence applications.
- 6.
The government has simplified the licensing process for defence manufacturing. Previously, obtaining licenses was a lengthy and cumbersome process. The government has streamlined the process and made it easier for companies to obtain licenses to manufacture defence equipment. This has reduced bureaucratic hurdles and encouraged private sector participation.
- 7.
The government provides financial incentives to companies that invest in defence manufacturing. These incentives include tax benefits, subsidies, and access to concessional financing. The aim is to reduce the cost of manufacturing in India and make it more competitive with foreign suppliers. For example, the government offers a 25% capital subsidy for investments in defence manufacturing.
- 8.
The Defence Acquisition Council (DAC), headed by the Defence Minister, is the apex body responsible for approving defence procurements. The DAC plays a crucial role in promoting Make in India in Defence by prioritizing indigenous solutions and approving projects that support domestic manufacturing. The DAC also reviews the progress of Make in India initiatives and takes steps to address any bottlenecks.
- 9.
The government has increased the foreign direct investment (FDI) limit in the defence sector to 74% under the automatic route. This means that foreign companies can invest up to 74% in Indian defence companies without requiring prior government approval. This has attracted significant foreign investment into the Indian defence sector and boosted domestic manufacturing.
- 10.
One challenge is the lack of a robust domestic supply chain. Many defence manufacturers still rely on imports for critical components and raw materials. The government is working to develop a strong domestic supply chain by encouraging Indian companies to manufacture these components and materials. This will reduce dependence on imports and enhance self-reliance.
- 11.
The UPSC exam often tests your understanding of the various schemes and policies under Make in India in Defence. Focus on the objectives, key features, and impact of these initiatives. Also, be aware of the challenges and opportunities in the Indian defence sector. You should be able to analyze the effectiveness of Make in India in Defence in promoting self-reliance and enhancing national security.
Visual Insights
Evolution of Make in India in Defence
Timeline showing the key events in the evolution of the Make in India in Defence initiative.
The Make in India in Defence initiative aims to boost domestic defence manufacturing and reduce reliance on imports.
- 2014Make in India in Defence initiative launched
- 2020Government releases a list of 101 defence items banned from import
- 2021Government approves a scheme to promote defence exports
- 2022Ministry of Defence approves procurement of defence equipment worth over ₹76,000 crore from domestic sources
- 2023Government launches the SRIJAN portal to promote indigenization of defence equipment
- 2026Indian Air Force demonstrates combat capabilities at Exercise Vayu Shakti in Pokhran.
Understanding Make in India in Defence
Mind map illustrating the key aspects of the Make in India in Defence initiative.
Make in India in Defence
- ●Objectives
- ●Key Policies
- ●Initiatives
- ●Challenges
Recent Developments
5 developmentsIn 2020, the government released a list of 101 defence items that would be progressively banned from import. This list has been expanded since then. This positive indigenisation list aims to boost domestic manufacturing and reduce reliance on foreign suppliers.
In 2021, the government approved a scheme to promote defence exports. The scheme provides financial assistance to Indian companies to participate in international defence exhibitions and promote their products in foreign markets. The goal is to increase India's defence exports to ₹35,000 crore by 2025.
In 2022, the Ministry of Defence approved the procurement of defence equipment worth over ₹76,000 crore from domestic sources. This includes helicopters, missiles, and other weapon systems. This decision reflects the government's commitment to promoting Make in India in Defence.
In 2023, the government launched the SRIJAN portal to promote indigenization of defence equipment. The portal provides a platform for Indian companies to showcase their products and connect with potential buyers. It also facilitates technology transfer and collaboration between Indian and foreign companies.
As of 2024, the focus is on enhancing the capabilities of Indian MSMEs in the defence sector. The government is providing them with financial and technical assistance to upgrade their technology and improve their competitiveness. This will help create a more robust and resilient defence industrial base.
This Concept in News
1 topicsFrequently Asked Questions
61. What's the most common MCQ trap regarding the offset policy under Make in India in Defence, and how can I avoid it?
The most common trap is confusing the contract value threshold that triggers the offset obligation. Many students mistakenly believe it's ₹300 crore or ₹1000 crore. The correct threshold is ₹2000 crore. To avoid this, remember 'Two Thousand for Transfer'. This reminds you that a contract needs to be at least ₹2000 crore for the foreign company to be obligated to invest back into the Indian defence industry through offsets like technology transfer or local manufacturing.
Exam Tip
Remember: 'Two Thousand for Transfer' (₹2000 crore triggers offset obligations).
2. Make in India in Defence aims to reduce import dependence. But what specific vulnerabilities did India face due to this dependence that the initiative directly addresses?
India's import dependence created several vulnerabilities. Firstly, during conflicts or geopolitical tensions, the supply of critical defence equipment could be disrupted, compromising national security. Secondly, dependence on foreign suppliers often meant limited control over technology and maintenance, hindering indigenous development. Thirdly, it led to significant outflow of capital, weakening the domestic economy. Make in India in Defence directly addresses these by fostering domestic production, ensuring a secure supply chain, promoting technology transfer, and boosting the Indian economy.
3. The Defence Procurement Procedure (DPP) prioritizes Indian vendors. How does this work in practice, and what challenges remain in ensuring its effective implementation?
The DPP gives preference to Indian vendors through various categories like 'Buy (Indian-IDDM)' which mandates procurement from Indian vendors with indigenously designed, developed and manufactured items. However, challenges remain. Indian companies often lack the scale, technology, and financial resources to compete with established foreign players. Bureaucratic delays in procurement processes and a lack of transparency can also hinder effective implementation. For example, a tender might specify unrealistic technical requirements that only foreign vendors can meet, effectively circumventing the preference for Indian vendors.
4. What is the Strategic Partnership (SP) model, and why has its implementation been slower than initially expected?
The SP model aims to create globally competitive Indian defence companies by selecting a few as strategic partners and encouraging them to collaborate with foreign technology providers. Implementation has been slow due to several factors. These include delays in identifying suitable strategic partners, complex negotiations with foreign technology providers, and concerns about technology transfer and intellectual property rights. For instance, the initial SP projects faced delays because of disagreements on the extent of technology transfer and the level of control that Indian partners would have over the technology.
5. The government has banned the import of several defence items. What are the potential downsides of this positive indigenisation list, and how can these be mitigated?
Potential downsides include: a temporary shortage of critical equipment if domestic production cannot ramp up quickly enough; reduced competition, potentially leading to higher prices and lower quality; and stifling innovation if Indian companies face no external pressure to improve. These can be mitigated by: investing heavily in R&D to accelerate indigenous development; ensuring fair competition among domestic players; and establishing a robust quality control mechanism. The government should also periodically review the list to ensure that items are removed once domestic capabilities are sufficiently developed.
6. How does the Innovations for Defence Excellence (iDEX) initiative support startups and MSMEs, and what metrics are used to measure its success beyond just the number of startups funded?
iDEX supports startups and MSMEs by providing funding, mentorship, and access to testing facilities. Beyond the number of startups funded, success is measured by: the number of technologies successfully commercialized and inducted into the armed forces; the value of contracts awarded to iDEX startups by the Ministry of Defence; the number of patents filed and granted; and the increase in private investment in the defence startup ecosystem. For example, the successful development and deployment of counter-drone technology by an iDEX-funded startup would be a key indicator of success.
Source Topic
Indian Air Force demonstrates combat capabilities at Exercise Vayu Shakti in Pokhran.
Polity & GovernanceUPSC Relevance
Make in India in Defence is highly relevant for the UPSC exam, particularly for GS Paper 3 (Economy, Infrastructure, Science & Technology) and GS Paper 2 (Government Policies & Interventions). Questions can be asked about the objectives, features, and impact of the initiative. You should be prepared to analyze the challenges and opportunities in the Indian defence sector and evaluate the effectiveness of Make in India in Defence in promoting self-reliance and enhancing national security.
In prelims, expect factual questions on specific schemes, policies, and targets. In mains, expect analytical questions that require you to critically assess the initiative and suggest ways to improve it. Recent years have seen questions on defence indigenization and the role of the private sector in defence production.
For the essay paper, you could be asked to write on the topic of self-reliance in defence or the role of technology in national security.