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Wednesday, 20 February, 2002, 17:41 GMT
India woos weapon makers
Indian Defence Minister George Fernandes
India buys most of its weapons from Russia
India, one of the world's largest arms buyers, wants to turn its inefficient domestic defence industry into an export earner.

And it is using the Defexpo 2002 to showcase the role the private sector can play.


The Indian government wants to increase sales but faces huge competition because it produces very low grade products

Rahul Bedi
Indian defence expert
India only opened up it is defence manufacturing sector to private investment last month after more than 50 years of government control.

"Our attention is now being focused from being recipients of technology to being partners in developing new products," Defence Minister George Fernandes said at the inauguration of the weapons fair.

"Our vision is to create in India a defence industrial base capable of producing world class products at highly competitive prices," Mr Fernandes said.

The nuclear-armed country is hosting the international defence exhibition in Delhi, at which twenty-six countries will be displaying their products over five days.

Sceptical reception

Defence industry analysts expect the government vision could take some time to realise.

"The Indian government wants to increase sales but faces huge competition because it produces very low grade products," Indian defence expert, Rahul Bedi, told the BBC's World Business Report.

Indian Defence Minister George Fernandes
Fernandes (right) wants India to build more hi-tech weaponry
"Indian exports are very poor quality and mainly centred around belts, boots, uniforms, some ordinance, low calibre ammunition and one or two helicopters that have been presented to countries like Namibia or Ghana," said Mr Bedi.

The government controlled all defence production until 1998, when a cash shortage forced it to farm out projects to private companies.

"There is a lack of trust by the private sector in the government, firstly to do with transparency, and secondly because of the highly classified nature defence occupies in this country," Mr Bedi said.

As part of its broader economic liberalization, the government allowed 26% of direct foreign investment in defence production.

The combined sales of 39 Indian ordnance factories and eight state-run defence production companies about $2.6bn in 2001, Mr Fernandes said.

Strategic background

India is likely to increase defence expenditure by a 25-30% from 620bn rupee in 2001, India's Economic Times has reported.

Nuclear-armed India buys most of its weaponry from Russia, which is one of the largest participants at the arms fair with 29 of its production plants taking part.

Delhi says it needs a strong defence against neighbours Pakistan and China.

India and Pakistan have fought three wars since they won independence from Britain in 1947.

India also fought a war with China in 1962 and the two countries, which have the largest armies in Asia, have unsettled territorial disputes.

 WATCH/LISTEN
 ON THIS STORY
Rahul Bedi, Indian defence expert
"There is a lack of trust by the private sector in the government."
See also:

05 Feb 02 | Business
Boost to India privatisation
16 Mar 01 | South Asia
Scandal shakes Indian Government
27 Feb 01 | South Asia
India to boost defence budget
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