Impact of Offset Policy on India’s Military Industrial Capability

India’s offset policy in 2005 envisaged direct purchase of products and services, Joint venture, FDI, etc. So far, 12 Offset contracts have been concluded for $2 B. The study shows that most of it is far low end products and services repair and overhaul facilities, training, and simulators. However, expected inflow in terms of long term investments, FDI have not materialized.

The major reasons seem to be low FDI cap of 26 per cent and non-inclusion of technology transfer in its scope. The paper strongly suggests the need for increasing FDI limit upto 50 per cent so that major foreign arms producers find profitable to invest in defence production sector. Besides, critical areas of technology like weapons, sensors, detectors and propulsions and design and development capability should be targeted. Strong Government support and a single point empowered defence offset agency will facilitate the process of optimizing the offset opportunity of $25 b during 12th Plan.

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