08 Dec 2015 20:11 IST

Manufacturing for India’s military holds great opportunity

A file picture of an Anti-Aircraft Gun System on display at the 2010 Defence Expo in Delhi

For the MBA with an entrepreneurial mind, starting small by making simple components on contract holds promise

Nearly 3,000 years after the first metallic weapons were made in the Mediterranean region, it is shocking that that one of the world’s largest industries is devoted to making machines that kill. According to the website globalissues.org, annual military expenditures account for over $1.5 trillion, nearly 3 per cent of the world’s total output.

Stacking up

The US defence budget is about thirteen times the size of Russia’s budget and more than the combined defence budgets of the next 11 countries. The US not only makes the world’s most advanced weaponry, it also makes sure they are deployed worldwide. It operates 662 overseas bases in 38 foreign countries. Compare this to just one overseas base of Russia, in Syria.

The US military industrial complex is massive. Six of the world’s top 10 defence contractors are American – Lockheed Martin, Boeing, Raytheon, Northrop Grumman, General Dynamics and United Technologies. These companies vie with other western firms to sell their arms to countries around the world, including Saudi Arabia and India, the two largest buyers of weapons.

Given the geopolitical pressures that India faces, it should be no surprise that successive governments over the years have made modernising the country’s military a priority. India’s defence budget for 2015 was a mammoth Rs 2.47 lakh crore with nearly Rs 40,000 crore (about $6 billion) set aside for buying weapons from overseas.

Make in India

The Make in India initiative is designed to limit weapon imports as a national security matter. Depending upon foreign suppliers for sensitive technologies makes India vulnerable to the whims and fancies of foreign governments during wartime.

Instead, building a large private defence manufacturing industry will create jobs and improve the country’s scientific and technical prowess. (The best example here is the Mangalyaan project, which brought the country global praise for launching a satellite to Mars within a budget that was not much larger than that used to promote a Hollywood movie).

It saves the country valuable foreign exchange as every dollar not spent upon weapons purchases can be used for something else. It gives India the opportunity to get into the lucrative business of exporting arms and exert more diplomatic influence in the region.

Self reliance

But, most importantly, it gives Indians a sense of pride that we would be largely self-reliant in defending ourselves.

Lofty as these goals are, achieving them is not easy. Foreign suppliers are wary of transferring technology to Indians for fear that they are cannibalising their own product lines as Indian companies may well begin to sell generic variants for a fraction of the price. This has already happened in the pharmaceutical industry. Developing home-grown technology takes time, investment, commitment and skills. It has taken Japan several decades to build its own under-100 seat regional jet (the Mitsubishi RJ) although Japanese companies are vital suppliers of major aircraft parts for Boeing and Airbus, giving them excellent knowhow.

The Indian government is aware of these challenges, which is why it is throwing every possible incentive to would-be entrepreneurs, borrowing heavily from the military-industrial models of the West. If one sets up manufacturing facilities in depressed economic regions like the North-East, Himachal Pradesh or Uttarakhand, special regional concessions apply. State governments are offering subsidised land, power and financing with stamp duty exemptions for buying or leasing land. The Indian government is allowing companies to write off 200 per cent of all expenditures related to research and development. And it is backing it with the full weight of the Indian export machine to help companies sell abroad.

The tangible and intangible benefits are truly enormous.

Good opportunity

For the young MBA graduate with an entrepreneurial mind, Make in India is a tremendous career and growth opportunity. One can start small, by making simple components on contract and gradually scale up. A professional I spoke with at a conference last year started small too. In the mid-1990s, he was a government scientist leading the country’s development of electronic voting machines at BEL. After retirement, he proposed to the government that he would make parts for the military. Today, he runs a 1,200- person company making systems, including for mobile launchers, military satellites and radar, for every discipline of India’s armed forces. Given the outlook for Indian military spending, he doesn’t lose sleep about his company’s growth prospects. Not a bad position to be in.

To read more from the Worldview section, click here .

Recommended for you