Indian Ministry of Defence will shift development funding to procurement

India’s Ministry of Defence (MoD) will re-allocate unspent armament development funding towards arms procurement (IHS Jane’s).

The $8.46 billion U.S. in question had originally been earmarked for India’s nine Defence Public Sector Undertakings (DPSUs), which are public sector firms – such as Hindustan Aeronautics Limited (HAL) – responsible for developing homegrown defence solutions for the Indian armed forces.

The freed funding will be used to support various armed forces modernization acquisitions.

Comment and Analysis

With India’s private sector playing an increasingly essential role in fulfilling the Indian armed forces’ defence requirements, it seems that the Indian government is beginning to tilt the indigenization mandate away from the public sector.

In July, New Delhi scaled back its requirements on foreign defence vendors to loop public sector firms – such as the DPSUs – into joint ventures in order to meet their offset requirements (IHS Jane’s). Instead, it seems that private and public sectors will compete for foreign vendor contracts on an equal playing field.

It must be noted that the re-allocation is in relation to unused funds, so it would be incorrect to suggest that the India MoD’s decision is an indictment on the DPSUs. However, if these funds are used in support of off-the-shelf purchases from abroad, the private sector will have additional opportunities to secure work. Whether this is a result from a renewal in shelved initiatives, such as the Indian Air Force’s delayed multi-role tanker and transport (MRTT) program, remains to be seen.