By Aritra Banerjee
The Union Budget 2022 announcement paved the way for ‘Make-In-India’ defence, with 68% of the defence budget earmarked for the indigenous industry. Here is what leading voices from the domestic and foreign defence and aerospace sectors say about this year’s defence budget.
What Industry Leaders Have To Say
SP Shukla, the President of the Society of Indian Defence Manufacturers (SIDM), welcomed the announcement of “setting aside 68% of the capital outlay of the defence budget for domestic industries. This will sustain investments and attract fresh capacity creation.”
“The creation of a nodal body for setting up testing and certification requirements of defence systems and platforms will help the domestic industry through faster processes and cost-efficiency,” he said before adding that the “allocation of 25% of Defence R&D budget for startups, academia and private industry is a much-needed reform. We thank the Ministry of Defence and Ministry of Finance for this major boost to research and innovation.”
President & Country Head of Pratt & Whitney, Ashmita Sethi shared her assesment: “We congratulate the government on a strong, inclusive and growth-focused budget in 2022. We believe that the far-sighted measures for energy transition, climate action, and advancing defence R&D with the private sector will be crucial towards securing India’s bright future. We would have liked to see additional aviation-specific reforms this year, as the sector battles the significant impact of the pandemic.”
“Thales welcomes the forward-looking statements by the Union Finance Minister that seek to strengthen the vision of Atma Nirbhar Bharat. The allocation of 68 percent of the defence procurement budget for domestic equipment in FY23 is a positive step towards self-reliance,” Ashish Saraf, the VP and Country Director for Thales in India, said.
He further opined that the “efforts to foster innovation by earmarking 25% of Defence R&D budget to private firms, startups, and academia bode well for all stakeholders and will allow international OEMs to bring more technology into India. We also appreciate the budget’s emphasis on collaboration between government and industry, with private companies urged to take on the design and development of military platforms in collaboration with DRDO.
“These steps will enhance local capabilities and build our expertise at a world-class level. We, at Thales, remain committed to strengthening our industrial footprint in India by developing our local teams, futuristic technologies and partnerships in line with the ‘Make in India’ initiative.”
Raman Sopory, Founder & President, Aerospace & Defence Consultants Association of India (ADCAI), pointed out that “the CAPEX allocation in Defence is a reflection on the security threat perception. Accordingly, for FY 2022-23, the Govt of India has allocated INR 525,166.15 crore to the MoD. This is INR 46,970 crore or 10 percent more than the previous year’s allocation of INR 478,196 crore and the sharpest increase in the defence budget in recent years.”
“Hike in both the capital and revenue defence budget is significant at a time when India continues to remain locked in a military standoff with China in eastern Ladakh. The budget also announced the setting up of an independent nodal umbrella body for meeting wide-ranging testing and certification requirements, which is motivating,” he said.
Vice Adm Paras Nath (Retd) AVSM, VSM, Group President, Crown Group of companies (Defence Engineering Division) said, “it is heartening to see that part of the R&D budget has been allocated to the industry, startups and academia. This will be a positive move in particular to startups and MSMEs to have their in-house R&D.
“Some of our suggestions to help make India AtmaNirbhar in Defence manufacturing are: firstly a “directive is necessary for PSUs to offer existing facilities with spare capacities to the Industry in line with the GOCO (Government-Owned and Company Operated) policy and secondly “R&D support being provided to Industry and startups should have minimum five years gestation period.”
Sterlite Technologies’ (STL) MD Ankit Agarwal, said, “we believe that this budget will prove to be a shot in the arm for accelerating India’s digital, domestic and defence ambitions. On the one hand, it addresses digital connectivity for all through optical fibre and digital services in 100% of the villages by 2025. On the other side, it sets the foundation for India’s 5G readiness through spectrum auctions, R&D impetus, USOF allocation, along with a boost for domestic manufacturing through a timely ‘Design-led manufacturing’ scheme.
“The move to allocate 68% of the Defence capital procurement budget for domestic players is also a positive stepping stone towards self-reliance in hi-tech manufacturing. At a macroeconomic level, a 35.4% increase in capital expenditure will bring necessary investments and drive consumption. As India braces to reap benefits from this progressive budget, greater policy impetus for procedural simplification, such as single-window clearances and more conducive models for private-public investments, would act as a multiplier.
“From a longer-term perspective, more Government investment in digital infrastructure would be absolutely essential for building a robust digital economy. In this context, a digital-first budget philosophy that focuses on the digitalisation of ministries’ budgetary allocations will ensure across the board acceleration of public services in addition to enhanced connectivity.”
Syed Qais Hayat (R), President Strategy & Operations, ART PARK (AI & Robotics Technology Park): “68% of defence procurement budget in 2022-23 is to be earmarked for domestic equipment. This is up from 58% in the last fiscal. This will provide further impetus to greater participation of domestic industry in Defence Capital acquisitions. This is in line with the government’s approach to not import capital assets in all cases where the domestic industry can create products and solutions.
“Therefore, import of capital assets for defence will be resorted to mainly in those cases which necessitate urgent procurements (generally self-defence) and in-house development of matching technology is unlikely in near to mid-term. This means the Ministry of Defence, its Departments and Services will have a larger than ever onus to carry out a thorough environment scan of in-house capabilities in defence production to identify, support and induct technologies, equipment and platforms to be able to justify any capital imports.”
What Independent Analysts Have To Say
IA&D was told by Air Vice-Marshal Pranay Sinha (Retd) that, “on face value, it [68% defence budget allocation to Indian firms] will give impetus to the home industry. Long term impact – needs detailed study.”
Major General Rana Goswami (Retd) believes that “everything depends on the level of technology involved and its availability within the country. If you lay down limits, you may land up with no purchases because of non-availability or provide substandard products, which will let us down in war, as it has happened in the past.”
“We should select the best, wherever it is available. If ex-import, sign a TOT contract, so that a certain percentage is bought off the shelf for immediate needs and the remaining is made through technology transfer, within our country,” Maj Gen Goswami explained.
On the other hand, Rear Admiral Vineet Bakshi (Retd) told IA&D, that “fundamental to the budget is the process for acquisition. This has been evolving continuously, such that there is no clarity or stability. A policy today is in the bin tomorrow. It would be prudent to have a system of procurement which would assure the suppliers of some stability of methods and assurance of continuity of orders.”
Looking at the Budget from a naval perspective, RAdm. Bakshi noted: “In so far as a maritime perspective is concerned, the need for the Indian Navy and the Indian Coast Guard is limited, barely 8-10 ships per year and one submarine per year. It would be worthwhile to build specialised capabilities in select yards to encourage highly specialised construction techniques, which take many years to develop.”
“Further, having built facilities, care should also be taken to nurture them. GSL has built capabilities of making specialised Fibreglass Minesweepers, was given order but cancelled for some reasons. The Yard is now devoid of orders whilst the Navy has practically decommissioned most of its own MCMVs! Making in India is good policy; we need the technology to back it,” RAdm. Bakshi (Retd) concluded in his assessment.
