After the self-imposed embargo on 101 defence equipment in an attempt to boost ‘Make in India’ initiative in the defence sector, analysts believe that such a measure would have little impact beyond the steps already taken to expand local production.
According to a report published by the Stockholm International Peace Research Institute (SIPRI), India is the world’s second-largest importer of major arms in 2014–18 and accounted for 9.5% of the global total.
The import embargo announced by the Ministry of Defence (MoD) bans $47 billion worth of imports that include communication satellites, conventional submarines, and light machine guns.
Amit Cowsish, a consultant with the New Delhi-based Manohar Parrikar Institute For Defence Studies and Analyses and a former financial adviser on acquisitions in the MoD, says that the move “will have little impact beyond measures already taken to localize defence production and reduce import dependency.”
Defence experts have also said that the embargo didn’t address critical issues such as the certification of systems and locally-made components, and won’t prevent the military from making emergency purchases of equipment from foreign vendors.
With the ongoing raging border dispute with China, the need for more advanced weaponry has increased and indigenous defence equipment can barely meet this requirement. Hence, emergency procurements are being made in case the border situation gets worse.
“Time and access to technology is fundamental to such efforts — currently a large proportion India’s defence industry is little better than system integrators,” said Rahul Bedi, a New Delhi-based independent defence analyst.
“A major dose of realism is needed.” He further added that the banned list is also vague on the position of joint-ventures between Indian and foreign manufacturers and license-produced weapon systems.
Meanwhile, the domestic defence industry has hailed the move. Defence stocks have also gained after the announcement, with hopes on the proper implementation of the initiative. Sanjiv Bhasin, Director of IIFL Securities, stated “There will be a marginal impact sentimentally…but we will have to see whether it flows into orders and so on. It makes the Make in India theme stronger”.
“We are sure that this list will keep getting amended to add newer programs that lay a road map matching our nation’s aspiration,” said Jayant Patil, senior executive vice president (defence & smart technologies), Larsen & Toubro Limited.
The decision is likely to benefit key companies like Kalyani group, L&T, Tata Group, Ashok Leyland, Alpha Design, Adani Group, Mahindra Defense, SSS Defense, MKU, Tonbo Imaging, IdeaForge, Punj Lloyd and would also translate into more orders for the state-owned enterprises like OFB and HAL.