New Indian Regime Will Sign Long-Delayed Deals

AIN DEFENSE PERSPECTIVE » MAY 30, 2014

by  NEELAM MATHEWS

Arun Jaitley, India’s new defense and finance minister, meets Air Chief Marshal Arup Raha. (Photo: Indian MoD)

May 29, 2014, 3:55 PM

A lack of decision-making on large Indian defense procurement deals in the past two years is expected to end with the swearing-in of the new government headed by Prime Minister Narendra Modi. Changes in procurement and offset policies are also expected.

Major projects that are in the final stage of processing and require a signature for conclusion include the 126-aircraft medium multi-role combat aircraft (MMRCA) won by Dassault Aviation’s Rafale; the Airbus A330 multi-role tanker transport (MRTT); and naval multi-role helicopters. While these are likely to be signed this financial year, a crash crunch could hold other decisions until next year. To fast-track some projects, the Ministry of Defence has proposed an approximately 25-percent hike in its 2014-15 budget from the $36 billion allocated last year. More than half of that is allocated to salaries and maintenance.

A Ministry of Commerce official told AIN that the Foreign Direct Investment (FDI) limit will be raised from 26 percent to 49 percent. “This should bring in investment for manufacturing defense products as we plan to increase the export base,” he added.

“Given Modi’s success in Gujarat where he was chief minister for 12 years, it is clear that the focus will now be on manufacturing and export,” the commerce official continued. In a recent interview on a popular television channel, Modi said, “We should involve Indian corporations in private-public partnerships for defense manufacturing.”

At a summit held in his state last year, Modi said, “I think that those investors, industrialists who are active in defense manufacturing, should be roped in. We should also turn ourselves toward small and medium enterprises, which can supply small defense parts.”

India’s new finance minister, Arun Jaitley, who has also been given the defense portfolio, said a full-time defense minister would be named “in a couple of weeks…it’s an important ministry and needs urgent decisions,” he added. Jaitley said that he would spend a “reasonable amount of time” at the MoD.