Will the Defence Production Policy 2018 help India switch from being the No. 1 weapons importer to an exporter?

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The draft Defence Production Policy 2018, released in March, visualises India as one of the top five countries in the aerospace and defence sectors in the coming years, with defence goods and services accounting for a turnover of ₹ 1.7 trillion by 2025.

By Baishakhi Dutta

Prime Minister Narendra Modi’s administration aims to raise the current ceiling on foreign direct investments (FDI) in the defence sector from 49 per cent to 74 per cent, according to a draft of the Defence Production Policy 2018 released by the Ministry of Defence. As of now, anything over 49 per cent is allowed on a case-to-case basis.

According to the draft policy, achieving the targeted FDI would require an investment of ` 700 billion and could create up to three million jobs. Another goal is to clock exports worth ` 350 billion by 2025. The defence ministry has sought comments and suggestions about the policy from experts and stakeholders. The draft policy comes at a time when India has been ranked the world’s largest importer of weapons for the tenth straight year by the well-known think tank, Stockholm International Peace Research Institute.

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The government has identified 12 military platforms and weapons systems for production in India to achieve the aim of ‘self-reliance’. These include fighter aircraft, medium lift and utility helicopters, warships, land combat vehicles, missile systems, gun systems, small arms, ammunition and explosives, surveillance systems, electronic warfare (EW) systems and night fighting enablers, among others.

According to the draft policy, the government not only aims to make India self-reliant in defence production, but also fulfil the defence requirements of other friendly countries. The policy states that the licensing process for defence industries will be liberalised, and the list of items requiring licences will be reviewed and then pruned.

The policy further states that ‘no-objection certificates’ and comments from all relevant agencies must necessarily be received within two weeks of the filing of the applications for licensing by the companies. It also states that the tax regime will be rationalised to make domestic manufacturing attractive by ensuring that there is no tax inversion. According to the draft, taxes on the import of capital goods and services, inputs and components used in defence production will be rationalised.

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