US-India, brothers in arms: How to best develop India’s indigenous defence capabilities

economictimes.indiatimes.com:

Narendra Modi's state visit to the US in June has sparked unprecedented momentum in the India-US defence ties. As competition in the Indo-Pacific escalates, the US is keen to give India access to top-grade military technology and flesh out the latter's role as a 'major defence partner'. But, for Delhi, stronger defence ties with the US are not an achievement.

The Centre is invested in Aatmanirbhar Bharat. So, the success of Indo-US defence ties will be measured by the degree to which they can help develop an indigenous defence supply chain. GoI's strategy has been to lift FDI caps in the sector, while designating key equipment for domestic procurement via an indigenisation list and earmarking capital expenditure.

Although this dual-track strategy is prudent, results have been mixed. While liberalised FDI caps have attracted the interest of foreign firms in defence production in India, the country's domestic base lacks the capacity to deliver on the necessary timelines due to barriers like product complexity and the lack of economies of scale. As a result, the Centre will often pivot to the government-to-government (G2G) procurement pathway, which bypasses indigenisation requirements.

This pattern runs counter to GoI's ambitions to incentivise domestic production, but reflects the reality that India's defence ecosystem cannot fulfil immediate security needs. Therefore, the policy conundrum India faces is filling these immediate needs while simultaneously building out its underdeveloped domestic defence ecosystem. The India-United States Defence Acceleration Ecosystem (INDUS X) initiative, which was launched on June 21, offers a promising approach that parallelly services the immediate and long-term imperatives.