‘Make with India’ possibilities for Indian-Israeli Defense SMEs

India has taken a quantum leap in its EODB ranking! India’s EODB ranking improvements are crucial for the growth of the world economy too. India, where all key ingredients of the business growth exist i.e. Democracy, Demography and Demand, the impact of this continuous improvement in the business environment would be tremendous! The recent policy reforms of the government have made India the most attractive destination for investments in the Manufacturing sector.

Defense Manufacturing Sector

India’s Defense Manufacturing sector has enormous opportunities for collaboration and growth. India has the third largest military in the world. Improving the internal and external security infrastructure is one of the top priorities of the Indian government. To fill the critical capability gaps, the Indian government has launched the wide-ranging plans for military modernization, police force modernization and border management.

A few days back, the Indian government has approved the implementation of umbrella scheme of “Modernization of Police Forces (MPF)” for the period of (2017-18 to 2019-20). The estimated cost of this scheme is Rs.25, 060 crores, out of which the Central Government share will be Rs.18, 636 crores and the States’ share will be Rs.6, 424 crores. The internal security, law and order, women security, availability of modern weapons, mobility of police forces, logistics support, upgradation of police wireless, police infrastructure, setting up new forensic science laboratories equipped with advanced technologies (in Amravati and Andhra Pradesh), improving the infrastructure of existing security institutions, National Satellite Network, CCTNS project, E-prison project etc. are some of the key features of this project.  For the internal security expenditure of Jammu & Kashmir, North East India, and Left Wing Extremism affected districts, the central budget outlay of Rs.10,132 crore has been set aside.

During the last three years, the Indian government has taken a number of policy-based initiatives to boost the indigenous defense production, technology upgradation, and defense export capabilities. The recent amendments to the Defense Procurement Procedures, the introduction of New Strategic Partnership policy in DPP, Offset Policy, EODB initiatives and improvements in the procedures for the grant of industrial licenses kind of initiatives are encouraging the domestic players and foreign players to explore the potential opportunities for ‘Make in India’.

Local manufacturing of defense equipment is at the core of the Make in India program. In India, a number of MSMEs used to serve as the suppliers to DPSUs and they are the key players behind the success of some major defense manufacturing projects.

According to the Dhirendra Singh Committee’s report (a committee set up by India’s Ministry of Defense in 2015), almost 80% of component, aggregates, and assemblies of the complex weapon system and aircraft are made by MSMEs, which are part of supply chains. According to this report, nearly 6000 MSMEs across the country are supplying the components and sub-assemblies to the DPSUs, Ordnance Factories, DRDO and private industries. The lack of advanced defense technology and poor production capabilities are some of the major hurdles in the growth of India’s defense production.

To fill the gap in the technological capabilities of India’s Defense MSMEs, Israel’s Defense Tech SMEs/Startups can play a crucial role. Israel’s defense tech industry is famous for delivering the operationally proven cutting-edge technologies. A number of Israeli SMEs with years of experience of developing high tech defense and security solutions are actively participating in Israel’s Defense supply chain.

Israel is a leader in Defense Technology. In Israel’s Defense Industry the contribution of SME sector is significant. Despite relatively low in numbers, these SMEs provide added value to the larger firms and they are crucial for boosting Israel’s Defense exports. These SMEs offer prompt innovative and flexible solutions to urgent needs and their knowledge/expertise are critical for the growth of Defense Industry in Israel. In 2014, the SME Department of SIBAT has taken some initiatives to promote their country’s Defense SMEs in the international markets. A few years back, the Director of SIBAT, Mr. Shmaya Avieli has established a dedicated forum to provide guidance and consultancy about exports to the employees of Defense SMEs too.

India-Israel Defense cooperation and a culture of Co-Production

The co-production and joint ventures are some of the key elements of India-Israel Defence Cooperation culture. In India, these ventures are crucial to lessen the dependency on the state-owned entities and for creating the jobs in the private sector.

During the last three years, a number of joint development initiatives have been launched between the big defense players of both sides, such as India’s Punj Lloyd and Israel’s IWI (to set up the first private sector small arms manufacturing plant), JV between Cyclone (a subsidiary of Elbit systems) and Mahindra Aerostructures of India, Israel Aerospace Industries (IAI) and India’s Kalyani Strategic Systems, IAI’s Golan Industries Division and Taneja Aerospace & Aviation Ltd, Reliance Defence’s joint venture with Kalashnikov Israel (a subsidiary of the CAA Company of Israel), India’s Adani Group’s collaboration with Elbit-ISTAR of Israel and Indian SME Alpha Design Technologies, IAI and Dynamatic Technologies of India, IAI and India’s Premier Explosives, India’s Kalyani Group and Rafael, Hyderabad-based Astra Microwave Products and Rafael and Reliance Defence and Rafael’s Joint Venture for big-ticket projects.

There is a need to push this culture of co-production between Indian Defense Manufacturing MSMEs and Defense Tech SMEs/Startups of Israel too, under the broader vision of ‘Make with India’.

Make with India

‘Make with India’ phrase is given by the President of Israel Mr. Reuven Rivlin, to reflect the trust between the both nations. This phrase has given a right direction to the future of this partnership. During PM Mr. Narendra Modi’s historic visit to Israel, Israeli Premier Mr. Benjamin Netanyahu has said: “On this visit, your Make in India Initiative meet my Make with India policy.” Both countries have agreed to focus on the joint development of Defense products, with a special emphasis on ‘Make in India’ and ‘Make with India’.

Role of the Governments- SIBAT and NSIC

India’s Defense Manufacturing MSMEs and Israeli Defense Tech SMEs are prepared to join hands together. There is a need to provide a dedicated and structured platform for facilitating the Israeli Defense Tech companies (SME/MSMEs) to fast track their joint venture and partnership proposals in India. Indian government’s NSIC (National Small Industries Corporation Limited) and Israel’s SIBAT (the International Defense Cooperation Directorate of the Israel Ministry of Defense) should work in this direction.

The Indian Defense Manufacturing MSMEs needs technology that Israeli Defense Tech SMEs can provide. Their combined capacities will lead to new ideas and innovations in future.