India's Defence Procurement Policy Reforms

India's defence procurement policy, often criticised for its delays and inefficiencies, is set to undergo significant reforms within six months to a year, as announced by Defence Secretary Rajesh Kumar Singh. This follows the Ministry of Defence's decision to deem 2025 as the "Year of Reforms" and an anticipated revamp of the Defence Acquisition Procedure (DAP) 2020.

Key Issues and Planned Reforms

• Current Challenges:
  • Singh described the procurement system as "broken," highlighting consistent failures to meet timelines.
  • He noted issues such as "gold-plated" requirements and lengthy evaluation processes.
• Reform Focus:
  • Streamlining timelines and addressing procedural inefficiencies.
  • Ensuring more pragmatic and timely preparation of Requests for Proposal (RFPs).

Economic and Industrial Considerations

• Resource Allocation:
  • Despite a 1.9% GDP allocation to defence, full utilisation is hampered by domestic absorptive capacity.
• Self-Reliance Challenges:
  • Self-reliance in aerospace is limited by the absence of critical technologies such as jet engines.
  • India's industrial base remains narrow, affecting mass production capabilities.

Competition and Market Dynamics

• Encouraging Competition:
  • The defence sector is described as the "last vestige of the license-permit Raj," with industrial licensing needing acceleration.
  • Efforts are needed to level the playing field for new entrants and support MSMEs in climbing the manufacturing value chain.
• Startups and Innovation:
  • India's position as the world's third-largest startup ecosystem requires providing these startups with visibility and support for orders.

Foreign Direct Investment (FDI) and Global Collaborations

• FDI Policies:
  • A liberal policy allows up to 74% FDI through the automatic route, with hopes for increased investments like Saab's 100% FDI.
• Strategic Partnerships:
  • Models such as the strategic partnership framework and collaborations like Tata and Airbus are encouraged.

Way Forward and Long-term Goals

• Technology and Capability Development:
  • Short to medium-term reliance on technology transfer, with long-term goals focused on indigenous development with DRDO support.
• Public Policy and Indigenous Supply Lines:
  • Optimization of policy-making amidst constrained choices, with an aim to develop a large manufacturing ecosystem for 'Aatmanirbharta'.