India's Hot Indigenisation Trend!

India's indigenisation journey, exemplified by initiatives like the "Preference for Make in India (PMI)" clauses in some Government tenders, has contributed to boosting high-tech capacity, employment and investment in the sectors where PMI has been applied. From defence to electronics, there is a realisation that greater indigenisation, particularly in high-tech sectors, is critical for national security and welfare. As the nation continues to focus on increasing the R&D intensity of its economy and strengthening its manufacturing capabilities, such initiatives will propel India's journey towards a robust, self-sufficient industrial landscape. Fostering technological self-reliance should form the core of our National Security doctrine, as it does for the USA and China.

Driving India's Defense Indigenisation Forward

The government's strategic focus on indigenisation extends across critical sectors including defence. In 2011, the High-Tech Defense Innovation Forum was launched at the Institute of Defense Studies and Analysis with the support of the then Director General Shri Narendra Sisodia, a pivotal moment for defence indigenisation. This initiative aimed to engage the defence ministry and armed forces in leveraging India's indigenous capabilities. Despite companies like L&T and Tata Power having played key roles in India's space and missile development, these capabilities often faced exclusion, even as India remained the largest importer of armaments in 2023 as per SIPRI figures. Recent decisions, such as procuring Tejas Mark I, Mark II, Mark IA, and funding AMCA, and rising defence exports are steps in the right direction. However, various challenges like "white labelling" imports as indigenous and restrictive tender practices persist. 

SITARA has proposed that the defence ecosystem requires a shift towards RDA (Research, Development, and Acquisition), prioritising research and development before acquisition, and that acquisition/ procurement be shifted to indigenously designed and produced armaments. SITARA has focused from the beginning on using Government procurement (around US$500 bn annually and more) to stimulate growth, employment, value creation and the development of high-tech capabilities, in all sectors of the economy.

This overhaul is crucial for promoting indigenous innovation and allowing unique domestic vendors to compete. Currently, the system leans towards foreign suppliers, sidelining capable Indian companies. An RDA would prioritise R&D investments in weapons technologies and procurement of domestically developed alternatives over only procurement, which in our view should come last as it fosters an import-friendly ecosystem. This transformation, coupled with efforts to address issues like white labelling and restrictive tender practices, can serve as a foundation for indigenisation. Urgent attention is also needed on defence offsets which has successfully driven indigenisation in countries like South Korea and Turkey. It's time to prioritise true indigenisation, not just for security but also to unlock the full potential of our defence manufacturing sector.

Telecommunications

The telecommunications sector, a key focus of Sitara, the successor of the High-Tech Defence Innovation Forum, plays a vital role in the nation's progress. National security also requires that a nation’s communications networks are secure, and this can only be assured if the products are indigenous. By highlighting issues of exclusion and unfair practices faced by Indian companies to our national security authorities, Sitara was instrumental in driving change in the sector. This includes instances of foreign companies capturing India's telecom networks, which led to a campaign starting in 2018 to rectify these issues. Sitara’s efforts bore fruit when a tender favouring Chinese companies was withdrawn by BSNL and reissued to create a more equitable playing field. Indian companies, including those within the Sitara network, subsequently won the tender, resulting in significant job creation and the development of high-tech capacities. A lot still needs to be done however as foreign companies are still capturing the bulk of the contracts issued in this sector, but progress has been achieved.

India's Semiconductor Vision

India's journey towards semiconductor self-reliance aiming to create an ecosystem that can match global standards is an exciting vision. China, for instance, has progressed rapidly in semiconductors due to sanctions, whereas India’s approach, also beneficial, involves inviting foreign companies to set up fabs in India.

However this raises concerns about intellectual property rights (IPR) and true sovereignty. Our proposal to the Ministry of Electronics and Information Technology (MeitY) aims to foster India’s self-reliance in next-generation computing technologies through a judiciously funded public-private initiative centred around a Sovereign Compute Stack (SCS). The SCS spans diverse domains, including microprocessors, embedded devices for basic remotes, cutting-edge robotics and space systems, indigenous cloud infrastructure, servers, and AI accelerators—surpassing even the capabilities of NVIDIA.

The proposal also seeks participation from visionary companies like the Tatas and Bharat Forge. India can then become technologically independent in a critical sector, tapping into the vast pool of Indian-origin engineers, comprising about 20% of the workforce developing cutting-edge technologies for foreign companies like Amazon, Facebook, and Google whose valuations are in the trillions, highlighting the potential for India's own tech prowess. 

The proposed sovereign compute stack, with an envisaged investment of Rs. 1,500 crores, will pave the way for trillion-dollar companies, intellectual property retention within India, boost the nation's economy and foster pride among Indian engineers working on a national project, offering similar opportunities and career growth as abroad.

The proposal for semiconductor self-reliance is not about Sitara taking ownership but creating a special-purpose vehicle that would be led by the private sector with government participation. Sitara's role could involve providing engineers and expertise, aligning with the government's vision for national projects.

Building tomorrow’s workforce

In recent decades, India's manufacturing landscape has undergone a remarkable evolution. Traditionally renowned for its strengths in textiles, handicrafts, and agro-based industries, the country has now diversified its manufacturing portfolio. With a burgeoning focus on technology, innovation, and skilled labour, India is emerging as a hub for modern manufacturing.

Positive trends in areas like chemicals, pharmaceuticals, automotive components and other machinery are indeed encouraging. In the automotive sector, for instance, back in 1991 during negotiations in Brussels, a technical assistance package for quality assurance standards in automotive components was secured. This led to a significant boost in automotive components exports and manufacturing meeting stringent international quality standards.

Chemicals have also shown remarkable growth, with one example being the absorption of Venezuela's entire oil exports by a single Indian company. These imports were processed at India's Jamnagar complex by Reliance, with products both re-exported and utilised domestically. While the chemicals sector is thriving, areas such as pharmaceuticals require greater emphasis on research and development (R&D) and maintaining standards, especially after recent quality concerns that are under scrutiny. Additionally, it is crucial to retain Intellectual Property (IP) within India by avoiding the sale of companies to foreign entities.

While the manufacturing sector has seen notable progress, it falls short of the goal to reach 25% of GDP. Many more reforms are needed to reach this goal.

One crucial area is vocational education, often overlooked but pivotal for a high-tech manufacturing ecosystem. Countries like Germany and Switzerland have shown the effectiveness of vocational education as a mainstream subject. In India, however, vocational education needs mainstream integration to produce skilled experts in various fields. This, coupled with improvements in ease of doing business and tax incentives for R&D, could significantly boost India's manufacturing and high-tech sectors. 

Foreign direct investment (FDI) can contribute to transforming India's economic landscape. Encouraging FDI in high-tech industries and addressing issues like infrastructure development and ease of doing business are crucial steps that are being taken. However, to sustain this momentum and maximise its impact on job creation and development, attention must also be given to vocational education to meet the demand for skilled workers. Additionally, addressing pollution and improving living conditions are vital to attracting more foreign investors, as India aims to position itself as an attractive investment destination.

A significant factor in India's economic growth is the increasing participation of women in high-tech fields which is yielding far-reaching benefits such as lower birth rates and higher education levels for children, creating a virtuous cycle of development. Tamil Nadu's lunch programme served as a prime example for other states in elevating girls' education and contributing to higher human development indices. While progress is being made, there is still much to do. Initiatives like those by NASSCOM, which actively promote women's employment in the tech sector, are steps in the right direction. Moreover, implementing long-term measures such as providing childcare facilities and safe transport options for women at night can further bolster their participation. Having more women in high-tech fields strengthens our capabilities and fosters innovation, diversity, and societal progress.

Pioneering Climate-Resilient Agriculture

India's focus on millets as a climate-resilient crop is a commendable step towards adapting to climate change. With rising temperatures and unpredictable weather patterns, millets offer a solution for semi-arid conditions, requiring less water and offering high nutritional value. SITARA has additionally submitted a proposal to Government to incentivise farmers to plant trees as a means of tackling the agrarian crisis and promoting ecological balance. Paying farmers to plant trees could not only mitigate the overproduction of cereals and water depletion, it could also provide farmers with a steady income and contribute to commercialisation and export opportunities.

The Way Forward

It's clear that India's path to growth hinges on strategic investments in R&D, improving the ease of doing business, and prioritising vocational education. Even as India aims to outpace China's growth, the sheer size of China's economy presents a challenge. However, with a focused approach to renewable and green energy, India can carve out a competitive edge. The push for domestic procurement, subsidies, and R&D incentives is essential to ensure India's industry can compete with global leaders in green technology.

Despite facing many challenges, Sitara's impact on India's indigenisation efforts has been significant, advocating for reforms across sectors like defence, telecom, and now semiconductors. By engaging directly with domestic industries, Sitara highlights simple yet crucial issues that require political will for resolution. The organisation's constructive approach, identifying problems and offering solutions, has garnered a positive response from policymakers. However, the challenge lies in implementation, as many proposals remain unexecuted. Sitara envisions a future where India achieves trillion-dollar valuations for its companies, retains value domestically, and improves national welfare through sustainable development. The focus on green energy and creating a sustainable India protected from the repercussions of global warming is at the core of Sitara's mission, aligning with the nation's goals for a prosperous and environmentally conscious future.