During the military advancement, India has to face many challenges in order to strengthen their military power for future use. The main factors that India is facing are high expenses on military technology and less domestic industry with lack of professionally skilled engineers in armaments. India relied on imports and became the world’s largest arms importer, due to lack of sizeable domestic industry and mixed track record in military modernization.
Thus, India’s Army is not receiving necessary military equipment to match India’s global aspirations. India’s army wanted to promote greater collaboration in international defense manufacturers and private sectors, however, it faces serious complex challenges if not addressed properly it could prevent the attempts to modernizing the facilities and equipment used by the military forces. In the 1990s, India reliance on imports identified as a problem which India relied heavily on USSR’s material and weapon technology. However, it became a genuine concern with USSR’s dissolution where Iraqi forces suffered a great defeat by the advancement of United States Army weapons and equipment. This triggered Indian planners to revise their weapon acquisitions and slowly accustom the Soviet’s weapon and diversified into India’s weapons platform.
This led to the building of new supply chains and becoming a key procurement goal. By 1994, it did lessen the cost of importing weaponry from foreign hardware. To attract the foreign investment and accomplish defense procurement, India decided to open the defense sector to FDI ( Foreign Direct Investment) in 200. About 100% equity and a maximum of 26% FDI. It becomes a challenge because of bureaucracy distrust of the private sector also the complication of FDI guidelines and lack of incentives from foreign companies from investing. Only a small investment figure at about $6 million in the past but slowly risen after India’s government revised the FDI policy from 2014 to 2016. The first plan is to raise the cap from 26% to 49% and slowly goes up to 100% subject to government approval.
The introduction of Defense Procurement Policy was suppose to ensure the expeditious procurement of Armed Forces in terms of capabilities sought and time frame prescribed by optimally utilizing the allocated budgetary resources. In 2005, DPP decides to formalize a key ‘offset-clause’ for a larger deals which it requires 30% of contract value to be invested in India. The intention was to channel a portion of contract value to develop Indian defense infrastructure. Unfortunately no single contract were secured resulting a serious of revisions in 2006 to 2017.
A vague vision on FDI guidelines and procurement policies will be successful in drawing the desired private capital. According to former Ministry of Defense acquisitions adviser stated that private companies operate on peripery of defense manufacturing even 16 years after its opening for participation. Even the procurement policy undergone many revisions over decades which plagues India’s defense modernization effort, that leads to severe shortage of personnel versed in defense and strategic affairs on decision making level.