Editor's Foreword

Chapter Ten
Reforming India’s defence industries
India’s vast defence-industrial infrastructure is undergoing
major reform. At the same time, India is modernising
and expanding its armed forces to encompass
widening political and security interests beyond South
Asia. To equip these forces, the country now aspires
to develop and build sophisticated weapon systems,
moving away from the historical pa�ern of foreignorigin
kit assembly and licensed production. These
plans are also being pursued with a view towards
entering potentially lucrative export markets.
Defence industries in India currently employ
over �.� million people and receive about ��%, or
just under US$� billion, of India’s annual defence-
procurement budget. But due to inefficiencies in
India’s public-sector defence industries (where there
are often long delays and high costs in the production
of largely low- to medium-technology arms and
equipment), over ��% of India’s arms are imported.
Even as the government seeks to encourage foreign
technological and financial investment in the defence
sector, along with a greater role for the Indian private
sector, it needs to implement bolder reforms and
restructure its defence-production establishment if
it is to become a major producer of high-technology
and sophisticated arms and equipment.
Public-sector defence-production agencies
On independence in ����, India had �� ordnance
factories manufacturing small arms, ammunition,
mines and explosives, with a nascent capacity
to service imported arms and equipment. In an
a�empt to maintain an independent foreign policy,
the government of Prime Minister Jawaharlal Nehru
aimed for national self-reliance in defence acquisition
and rejected, as lacking ambition, a ���� report
by British physicist P.M.S. Blacke�, which recommended
that India first produce low-performance,
older-technology weapons.
In the ����s, India built several new public-sector
ordnance factories, which had to maintain operational
capacity during slack periods by producing goods
for the civil market. An accusation following India’s
defeat by China in the ���� war that India’s weapons
factories were producing coffee percolators instead of
arms prompted an expansion of production facilities,
with a new administrative department within the
Defence Ministry becoming responsible for defenceproduction
activities. By the mid ����s, the number
of ordnance factories manufacturing primarily landbased
systems (such as main ba�le tanks (MBTs),
armoured vehicles, trucks, small arms and ammunition
and explosives) rose to ��; in ���� there were
��. Two more factories are under construction; one in
Nalanda, in eastern India and the other in Korwa, in
northern India, although the la�er has been delayed
by the June ���� suspension from trading in India of
Israel Military Industries, its co-developer, following
the arrest of a former Indian ordnance board chief on
corruption charges.
The largest existing ‘defence public-sector undertaking’
grew out of the ���� amalgamation of
Hindustan Aircraft Ltd (established in ���� by Indian
industrialist Walchand Hirachand) with Aeronautics
India Ltd. Hindustan Aeronautics Ltd (HAL) now has
�� divisions located in six states and is tasked with the
manufacture of combat aircraft and helicopters. The
products of the seven other specialised defence firms
controlled by the Defence Ministry include warships,
missiles, defence electronics, heavy earth-moving
equipment and special metals and alloys.
India’s first industrial-policy resolution, in ����,
made it clear that a major portion of industrial
capacity was to be reserved for the public sector,
including all arms production. When this document
was revised in ����, it placed the munitions, aircraft
and shipbuilding industries in the public sector under
central government control, preventing private-sector
production. Even though a new defence-supplies
department was set up in ���� within the Defence
Ministry, the private sector could only produce
components and spare parts. By the mid ����s,
private-sector production encompassed elementary
and intermediate products, components and
spare parts. In April ����, the chief of the powerful
Defence Research and Development Organisation
(DRDO) announced a ten-year plan for defence and
the defence-industrial base, aimed at increasing the
element of self-reliance in the Indian armed services