PM Narendra Modi addressing the inaugural gathering at Aero India. (Source: YouTube/Screen grab) PM Narendra Modi addressing the inaugural gathering at Aero India. (Source: YouTube/Screen grab)

The defence industry is at the heart of the Make in India program and India would no longer like to be tagged as the number one importer of defense equipment in the world Prime Minister Narendra Modi said at the inauguration of the 10th edition of the Aero India show here on Wednesday. The Prime Minister promised a slew of measures to encourage foreign manufacturers to produce in India to expand the small manufacturing sector in the country.

“We will build an industry that will have room for everyone – public sector, private sector and foreign firms. From sellers, foreign firms must turn into strategic partners. We need their technology, skills, systems integration and manufacturing strength,’’ Prime Minister Modi said in his biggest ever pitch to a core defense industry gathering for his Make in India policy.

“We have the reputation as the largest importer of defence equipment in the world. That may be music to the ears of some of you here. But, this is one area where we would not like to be Number One!’’ he said. “It will be no longer enough to buy equipment and simply assemble them here. We have been doing this in the past, without absorbing any technology or developing our own capabilities. In some areas, we are where we were three decades ago,’’ he said.

New reforms apart from already announced measures – like raising Foreign Direct Investment to 49% (and above if state-of-the art technology is involved), Foreign Institutional Investments up to 24 per cent and waiving off of the need to have a single Indian investor with at least a 51% stake – will be needed to put Make in India into mission mode, the Prime Minister said.

While nearly 60% of defence equipment needs are imported at the cost of tens of billions of dollars a 20 to 25% reduction in imports could directly create an additional 100,000 to 120,000 highly skilled jobs in India, PM Modi said, “If we could raise the percentage of domestic procurement from 40% to 70% in the next five years, we would double the output in our defense industry,’’ he said.

“We have to further reform our acquisition and approval processes. We must indicate a clear roadmap of our future needs. This must take into account not only new technology trends, but also the nature of future challenges,’’ he said. “We must ensure that our tax system does not discriminate against domestic manufacture in comparison to imports. More broadly, our defense industry will succeed more if we can transform the manufacturing sector in India,’’ he pointed out.

“Above all, we need a vast pool of highly skilled and qualified human resources for the defense industry. Our aerospace industry alone would need about 200,000 people in another ten years. We will set up special universities and skill development centres to cater to our defence industry, just as we have done in atomic energy and space,’’ Prime Minister Modi added.

While India will not stop importing defense equipment the country would like manufacturers to incorporate India in their global supply chain. “India’s frugal but sophisticated manufacturing and engineering services sectors can help reduce costs. India can also be a base for export to third countries, especially because of India’s growing defence partnerships in Asia and beyond,’’ he said.

The government will be introducing a scheme to provide up to 80% of funding for development of defense equipment prototypes in India as well as a Technology Development Fund accessible to both public and private sector, he indicated.

“For too long, our research and development has been confined to government laboratories. We must involve our scientists, soldiers, academia, industry and independent experts more closely in research and development,’’ the Prime Minister said.

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