Why defence manufacturing still struggles to take off even after 10 years of 'Make in India'

economictimes.indiatimes.com:

make in India to sell in India', results have been disappointing. Between September 2020 and May 2022, defence-related FDI barely reached $65 mn, with no major JVs announced for the manufacture of complex weapon systems.

In line with the 2020 revised FDI rules, GoI permitted foreign OEMs to bid for defence contracts through 74% majority-held JVs with local partners. GoI expected huge FDI inflows, and that foreign OEMs would set up JVs to manufacture and sell weapon systems. Hasn't happened.

The challenge for foreign defence OEMs to manufacture here centres on three issues:

• Investment While FDI cap has been raised to 74%, GoI's most preferred category, 'Buy (Indian-Indigenously Designed, Developed and Manufactured)' is restricted to 49% foreign ownership. 74% FDI is not enough. Foreign OEMs are hesitant to transfer cutting-edge weapons tech to India without 100% ownership and control.

• IP challenge Policy relating to 'Buy (Indian-IDDM)' requires local partners to either purchase IP rights from foreign OEMs, or own the system-level design rights. This presents two challenges for foreign OEMs who are either unwilling to sell IP of advanced weapon systems or, in some cases, unable to sell it as IP resides with foreign govts than OEMs.

• Indigenous content (IC) rule This mandates that 50% of the contract value be locally sourced. This forces foreign OEMs to restructure their global supply chains for local manufacturing, a deterrent, especially under FDI and IP restrictions.

• Finance

  Financial Literacy i.e Lets Crack