India bans import of 101 weapon systems to boost local production

11, Aug. 2020

India’s defense minister Rajnath Singh flags off 51st K9 VAJRA-T gun from local manufacturer Larsen & Toubro Ltd.’s facility at Hazira in the western Indian state of Gujarat on Jan. 16, 2020. (Photo courtesy of Press Information Bureau)
India’s defense minister Rajnath Singh flags off 51st K9 VAJRA-T gun from local manufacturer Larsen & Toubro Ltd.’s facility at Hazira in the western Indian state of Gujarat on Jan. 16, 2020. (Photo courtesy of Press Information Bureau)

NEW DELHI, NNA - India is banning imports of 101 defense systems under a roughly four-year schedule to give a tremendous boost to local weapon production.

Covering a spectrum of weapons and ammunition, it lists the items to be restricted progressively each year, from this December to 2024 as part of a broad policy to enhance self-reliance in key sectors of the economy.

The move will provide huge opportunities to the domestic defense industry with contracts worth almost 4 trillion rupees ($53.4 billion) likely to be awarded to local manufacturers within the next five to seven years, according to Defense Minister Rajnath Singh.

“Of these, items worth almost 1.3 trillion rupees each are anticipated for the army and the air force while items worth almost 1.4 trillion rupees are anticipated by the navy over the same period,” said the minister.

The schedule is a practical guide to prepare local industries to play a more significant role in fulfilling the defense needs of the second largest arms importer in the world. The items come under the categories of aviation, infantry combat systems, armored vehicles, artillery, naval systems, air defense, sensors and electronic warfare.

Indian defense players have been hoping they would get bigger slices of government contracts especially during a time when local businesses need help to ride out the slump caused by the pandemic.

Rather than having to compete with foreign rivals, they might have opportunities in future for joint ventures especially for weapons or components that are only made abroad meanwhile or new ones based on designs created in local research carried out in unison with foreign partners.

Launched in 2014, India's Make in India policy has made it attractive for foreign companies including those in the defense sector to invest in the country.

This was given a boost in May this year when the government raised the cap on foreign direct investment (FDI) for defense from 49 percent to 74 percent to encourage multinationals to set up factories in India or invest in local companies.

The move was part of the economic packages designed to help revive the economy hit hard by the coronavirus pandemic.

The latest announcement on import bans is welcome news to local defense companies as many of the items on the scheduled ban are already made locally.

“The aim behind promulgation of the list is to apprise the Indian defense industry about the anticipated requirements of the armed forces so that they are better prepared to realize the goal of indigenization,” the ministry said in a statement on Sunday.

“All necessary steps would be taken to ensure that timelines for production of equipment as per the negative import list are met, which will include a coordinated mechanism for hand holding of the industry by the defense services,” it added.

The ministry has also created a budget with an outlay of around 520 billion rupees for domestic capital procurement in the current financial year ending March 2021.

Welcoming the government’s decision, the Federation of Indian Chambers of Commerce and Industry (FICCI), said the new measures will provide much needed impetus to make the country self-reliant in defense technology and products.

“The industry is looking forward to more items being added progressively to this list so as to deepen the process of indigenization by leveraging the capabilities of Indian industry,” said FICCI president Sangita Reddy.

S.P. Shukla, who chairs FICCI defense committee, said that the decision to earmark 520 billion rupees for domestic capital procurement will allow the local industry to plan its capex and production capacity.

According to the latest data from the Stockholm International Peace Research Institute (SIPRI), India continues to remain the world's second-largest arms importer in the past five years.

The South Asian country spent over 457 billion rupees on defense imports during the fiscal year ended March 2019. Countries such as Russia, the United States, Israel, France and Britain are the key suppliers to India, which is the world's second largest army after China.

Meanwhile, India and China will be holding another round of talks to de-escalate a tense situation along their border which has seen a buildup of armed troops backed by tanks and missile launchers on both sides.

A clash involving fist fights, rods and stones in June resulted in the deaths of 20 Indian soldiers and soured ties between the two giant neighbors.