India has been striving toward defense self-sufficiency since the 1960s. The country has one of the world’s largest military budgets and also is the top arms importer, buying about 70 percent of its needs abroad. Last year, defense spending rose 5.5 percent to almost $64 billion, data last week showed. Bernstein estimates this could represent a $35 billion opportunity for the private sector.
Prime Minister Narendra Modi deserves credit for a $250 billion military modernization plan. The so-called Make in India program prioritizes defense manufacturing on Indian soil, luring both global heavyweights and domestic firms to bid on (among other things) the biggest-ever order for fighter planes.
A lot stands in the way of these grand plans, however: Much of the ballooning defense budget goes on salaries, chiefly for the army, at the expense of the navy and air force. Capital procurement – essentially, modernization – now accounts for less than 20 percent of total outlays. Meanwhile, red tape discourages Indian companies from investing or staying the course.
Since Modi took office almost four years ago, the government has increasingly leaned on foreign vendors. To lure more of them, the Defense Ministry…