The first ever Defence Production Policy reiterates the government's objective of achieving self-reliance in defence manufacturing, providing impetus to increased private sector participation and promoting indigenous R&D. The new Defence Production and Offset policies can and should be used to encourage and facilitate both domestic and foreign investments into India.

The Defence Minister unveiled last week two much-awaited policies—the Defence Procurement Procedure (DPP) 2011 and a Defence Production Policy (DPrP). The latter is the first such policy to have been enumerated since the sector opened up in 2001.

Our congratulations to the Defence Minister for announcing the two policies that reflect government's commitment to increase transparency, liberalize and speed up the procurement process and build indigenous industry. The government has stated that these policies will "expand our defence industrial base, encourage indigenous defence production and reduce defence imports" and, "will help achieve substantive self-reliance in design, development and production of defence equipment, weapon systems and platforms". Together they aim to create "conditions conducive for the private industries to play an active role and in particular, will act as a catalyst to enhance the potential of Small and Medium Enterprises (SMEs) for indigenization as also for broadening the defence research and development base of the country". These are indeed lofty and laudable goals, but the question is, are they realistic and to what extent will the DPP 2011 or the new production policy actually help achieve them? In this article, we will take a holistic view of both these policies together with related policies—the Foreign Direct Investment (FDI), the Industrial Licensing (IL) and taxation policies to assess how effective they will be in achieving the goal of self-reliance in arming our forces.

The Analyst Magazine, Defence Production, Private Sector Participation, Foreign Investments, Defence Procurement Procedure, Small and Medium Enterprises, SMEs, Foreign Direct Investment, FDI, Industrial Licensing, Taxation Policies, Domestic Industry, Indian Defence Sector, Original Equipment Manufacturers, Global Recession, Indian Industry.