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Over the years Indias defence sector had become a reflection of just another sarkari department,with necessary defence purchases in a limbo and domestic production capacities stymied. The full utilisation of the 2010-11 defence budget,after years of returning large sums unspent,was thus heartening. But that was less than the icing on a much-needed overhaul closure on big-ticket purchases; open tendering to discard the system of procurement that has to be routed through a defence PSU; and FDI in defence.

Now comes fresh bad news. As reported in The Financial Express on Friday,Defence Minister A.K. Antony has refused to budge on FDI,citing the hallowed narrative of defence being a sensitive sector. But it cannot be run like is a limping licence-raj mule. The ministries of finance,home,and commerce amp; industry are in agreement in pushing for an FDI hike in defence from the current 26 per cent to 74 per cent. The current policy of defence offsets hasnt worked because global firms dont transfer tech to firms over which they have no control. Thats why local Ramp;D hasnt been built,and Indias domestic defence production capability has remained undeveloped. For such transfer,we need FDI. Look at cars: Indias production quality in the automobile sector was so poor in the 1980s in the absence of FDI. With FDI and resultant technology transfer,India today exports cars. Although the defence ministry has cited several states that tightened their defence FDI after 9/11,this is a spurious comparison. Indias defence and strategic requirements are decidedly different.

If India is to embark on a strategic transformation from buyer to a buyer-producer-seller of defence equipment,and revitalising its eroding conventional advantage,defence needs reform. Not only is India falling behind the changing defence map in its neighbourhood,its also losing out on markets China is catering to,apart from its committed arming of Pakistan. The two imperatives are: increase in expenditure for the latest equipment,which must see defence accounting for more than 2.12 per cent of the budget; and enabling a strong domestic production capacity. This overhaul cannot happen without reforms. Whats still missing is political will in the defence ministry.