The offsets clause in our procurement policy may be seen by many of us as infusing FDI to the extent of 30-50 per cent of every contract into our economy. In spite of the large reserves of foreign exchange available, future FDI would continue to be an important factor. But this cannot be the primary reason for seeking offsets. We will need spare parts for thirty years or more. In between there will be many requirements of modifications and upgrades of the systems. We should be able to provide as much as possible from indigenous (mostly private) industry through joint ventures that must be negotiated now. The importance and extent of such agreements would be crucial to maintaining high serviceability and low accident rates of the combat force — and hence its effectiveness for war over the next three decades.

The new fighter would require a mid-life upgrade 10-15 years after it enters service, and this should provide a benchmark criterion for offsets to establish the ability to design and undertake that in India. This can be expected only if the components manufacturers establish design and development facilities in India. The Maruti experience of vendor development which has led to high levels of automotive parts exports needs a closer look in this regard. It needs to be remembered that design and development are the foundation for self-reliance, and till recently this suffered in our aircraft industry. The new fighter has already been designed elsewhere. But we have opportunities to access design and development of components, systems and sub-systems in partnership with foreign enterprises.

... contd.