Economic Survey 2022 highlights: Major reforms in India's Defence sector

The Economic Survey 21-22 indicates key supply-side measures and reforms in India's defence sector. The survey highlights the
Corporatization of Ordnance Factory Board (OFB) approved and 7 new Defence Public Sector Undertakings created. FDI has been enhanced in Defence sector up to 74% through the automatic route and up to 100% via the government route.

The changes in the FDI policy can be broadly categorized into measures taken to improve foreign participation while protecting Indian industry from opportunistic takeovers, to enhance transparency and rationalization of processes, and steps to monitor and expedite implementation

Measures taken to allow greater foreign participation

The FDI policy amendments, notified vide Press Note 4 (2020 series) dated 17.09.2020, have been carried out to realize the vision of an AtmaNirbhar Bharat. Now, FDI in defense sector is allowed up to 74% through automatic route (from earlier 49%) for companies seeking new industrial licenses. FDI beyond 74% and up to 100% will be permitted under the Government route. For existing FDI approved holders/defence licensees, infusion of fresh foreign investment up to 49% resulting in change in equity/ shareholding pattern can be done by making declaration within 30 days

Some initiatives taken to fight against COVID-19

Medical Oxygen Plants: Defence Research and Development Organisation (DRDO) was entrusted with installing and commissioning 931 Medical Oxygen Plants in 869 hospitals across the nation within six months, funded through the PM-CARES fund. These plants were designed and developed based on the spin-off technology of the Onboard Oxygen Generation System (OBOGS) of India’s indigenous fighter aircraft Tejas

Oxy-Care System: DRDO developed SPO2 based Oxygen Cylinder Controller (SPOCC) based Medical Oxygen Cylinders to optimally use the available medical oxygen for COVID-19 patients. This system supplies the quantity of oxygen based on an individual’s SPO2 levels. This technology was transferred to Bharat Forge Ltd and UFLOW automation. They have supplied 1.5 lakhs such systems to Government hospitals across the country.

Anti-COVID Drug: An anti-COVID-19 therapeutic application of the drug 2-deoxy-D-glucose (2- DG) in collaboration with Dr. Reddy’s Laboratories, Hyderabad was formulated. Based on results of Phase-II and Phase-III clinical trials, the Drug Controller General of India (DCGI) granted permission for Emergency Use of 2-DG as an adjunct therapy in moderate to severe COVID-19 patients. The drug comes in powder form in a sachet, which is taken orally by dissolving it in water. DRDO has transferred its patented process technology to 13 major Pharma industries. The defence experts expect an enhanced defence budget in 2022 as the government continues with the 5-year modernization plan for the Armed forces.

Defence budget 2022 is set to reflect modernisation plan of the Armed Forces for the next 5 years which is likely to attract a hike in the upcoming budget for the sector. The government is also focused on the acquisition plan for the services. Indian Defence forces are fast-moving ahead to become 'Atmnirbhar' with minimum dependence on foreign weapons, equipment, and technology. In order to achieve self-reliance, the government is also working on the blueprint for 5-year modernization. The government will create Defense Renewal Fund for long-term defence buyers.

In view of the challenge of the China People's Liberation Army in Ladakh and the continued treachery of Pakistan along the Line of Control, a long-term outline of military preparations is being prepared in the Ministry of Defense's Military Department. In order to create a synergy between the three services, the defense budget of this time will be allocated on the basis of the joint modernization roadmap of the three forces.

According to defense sources, in view of the ongoing build-ups along the LAC by China, the Indian side is also ramping up the infrastructure along the Northern borders, there might be an increased budget allocation for the forces. According to the sources the previous years' budget that remained unused can be utilised for the long-term projects that continue this year as special provisions and discussion with Finance ministry.

The Ministry has emphasized that military procurement and construction of infrastructure facilities such as roads and bridges etc. goes on for a long time, so it is not possible to spend the budget in a year.

There have been indications that not only will the budget be arranged for the expenditure in defense sector for one year but also according to the estimate of the next five years in the budget. It is estimated that this time there will be an increase in the defense budget.
A provision of Rs 4 lakh 78 thousand crore was made in the defense budget for the year 2021-22, which also included pension allotment. There was also a provision of more than 1 lakh crores for defense modernization.
The Ministry has sound reasons for more defense budget this time. The target is to complete the work of the integration of the three services in the coming years.

Major highlights of this year in Defence this year have been:

• Negative list for 209 items has been issued by the MoD of foreign equipments which will no more be imported.
• A list of 2600 items, equipment and machinery has been issued which will be produced by Indian DPSUs.
• The bigger indigenous acquisition approved this year was 83 LCA Tejas aircrafts.

The upcoming defence corridors in the country are also being fast-tracked and the budget will see a focus on the indigenization plans in the Defence sector. These plans will be instrumental in strengthening the defence forces with the spirit of 'Atmnirbhar Bharat'.