What role MSME could play and what are impediments to its role in Make in India – Defence? Examine suggesting policy steps.

MSME contribution in defence production is increasing due to liberalisation in defense sector. MSME can aid defence sector through

• MSMEs create value addition and bring innovation as they are ready to take risk.
• MSME can be the trusted partners of government to aid indigenisation of defense production under Make in India defence.
• Outsourcing from MSMEs will not only help to save cost and time but also in timely delivery of products.

In order to further augment the capacity and capability of MSMEs the following steps can be undertaken

• Sovereign defence fund: A PPP model with 49% government funding and remaining from the Industry with no player contributing more than 5 per cent. This will aid in long-gestation research and development projects and facilitate strategic global acquisitions in key technology areas of defence and national security. This will provide big support for the Micro, Small and Medium Enterprises by addressing the High R and D costs.
• Infrastructure status for the defence sector paving the way for easier credit and a greater role and opportunity for the private sector.
• Long term contracts: Ministry of Defence is the sole customer for the defence industry in the country. Without long-term contracts, certainty of volumes, a quick selection process, transparency and fair payment terms, there will be little incentive for MSMEs to invest in the defence production.
• Streamlining of the defence offset policy similar to the policy of Brazil. The Brazilian government has been able to leverage its defence buys to get state-of-the-art military technology from outside through licensed production and joint ventures.

MSMEs are the key players in the industrial production and output of the country. Further augmenting their capacities will aid in realizing the aim of self reliance in defence sector through Indigenisation.

Topics: GS-III: Indigenization of Technology and Developing New Technology