Innovation to herald new dawn for Indian industry: Stakeholders

A major concern was whether India had the right investment climate for bringing in FDI– and whether technology transfer and procurement-related issues were still a pain point. 

Apurva Chandra DG (acquisition) and Additional Secretary, Defence Ministry, GoI, said the current state of defence sector in the context of FDI was akin to a chicken and egg situation. “Could prioritisation of placing orders alone determine the quantum of investment or would the strategic partnerships be forged based on the requirement at hand?” he asked. 

According to Dr Mukesh Aghi, President and CEO, USISPF, “The tax structure between the US and India were different leading to a situation that called for policy tweaks.” 

In his view, the tax issues would be affecting even the commercial segment. In the US which has a predominantly private sector led defence industry, innovations are the key differentiators. 

In Silicon Valley, 18 months ago, 68 innovative start-ups under the Defense Innovation Unit Experimental (DIUX) had been making a mark. What this meant is using drones and other interesting disruptive technologies, he said, adding that the start-up culture of commercial ventures could be replicated in the defence sector too. 

Lt Gen Subrata Saha (Retd), DG, Society of India Defence Manufacturers (SIDM), said though his tenure in the armed forces had led him to engage with 32 technology institutions in the country, he found that they were unable to break out and create an innovative system. 

Pratyush Kumar, President, Boeing India, said the absence of industrial licence in defence manufacturing augured well for the sector that is going through a reform process. 

Also, the 30 per cent offset clause penalises FDI players in the context of global procurement opportunities. There was no premium for bringing in equity, he said, seeking tweaks in the policy. 

“FDI in defence from a large OE perspective is a bit of a red herring,” Pratyush said, noting that currently the investments that were happening at the components space itself got embedded in 100 per cent exports but when it came to a fighter jet, a Boeing or any other OE cannot participate in the manufacturing process unless an assured order support existed. 

Vincent Gorry, Director, European and International Affairs – GIFACS, French Aerospace Industry Association, said FDI not only should be OE concentric. It must trickle down to Tier I and II players for which an expanded vision beyond the OE was necessary.