The global financial crisis might have cast dark clouds over many industries but not the defence sector in India. This is because India's armed forces have a demand for new equipment and technology for the next 20-25 years and liberalisation of India's defence procurement policy offers a unique opportunity for Indian companies to provide services for the armed forces.
With the 34 per cent increase in the annual defence budget to Rs 1,41,703 crore, or 2.4 per cent of the GDP, there is an opportunity for Indian industry, especially the capital goods sector, to provide sub-contracting services to the armed forces, said S Rajan, joint secretary (exports), Ministry of Defence, at a CII seminar on opportunities for the capital goods industries in the capital today.
Currently, most of the sub-contracting services are being provided by the IT/ITeS sector, but the capital goods industries must step up its efforts to provide such services for the defence sector, he said.
By 2013, nearly $35 billion would be spent on defence in India, said Rajan.
An amount of Rs 3,000 crore has been earmarked for defence forces modernisation in the next three years, Rs 2,000 crore to build naval shipyards and Rs 2,000 crore earmarked for defence PSUs. All this money would be spent on imports if entrepreneurship is not encouraged in India's capital goods industries, said Rajan.
The defence offset policy, which requires a foreign vendor to spend a minimum of 30 per cent of its investment in building capability of Indian R&D, has led to many joint ventures between Indian and foreign vendors and this advantage must be leveraged at such a time, he added.
