Defence ELECTRONICS: Major business opportunities come knocking

With the Indian government stressing on the need for indigenous design, development and manufacture of defence equipment, and with the country’s defence outlay going up by around 10 per cent every year, the defence electronics sector is undergoing a paradigm shift with the entry of private players into a traditionally ‘public sector only’ domain. Yet, a major part of the market is yet to be explored

By Srabani Sen with inputs from Kartiki Negi

Thursday, July 24, 2014: With the 12th Plan’s (2012-17) outlay being pegged at over Rs 1000 billion, it appears that the defence/strategic electronics sector in India has the potential to become one of the larger sectors in India over the next 10 years. It is also estimated to grow at an average compound rate (CAGR) of 20-30 per cent. The sector accounts for around 6-7 per cent of the overall Indian electronics market.

The Interim Union Budget 2014-15 allocated Rs 2240 billion for the nation’s defence, which is a 9.98 per cent increase over the 2013-14 defence budget. With this annual increase, India is going to be one of the top 10 global spenders on defence.

Moreover, the government is now planning to increase the FDI in the defence sector up to 100 per cent. A Cabinet note said that a foreign company can even take over a domestic entity provided it brings in state-of-the art technology. “This will hugely help in reducing import bill for defence equipment, and help in boosting manufacturing and creating jobs,” the note stated.

Although the government is the sole buyer and market marker for defence electronics, and the sector is entirely governed by the defence policy, contrary to general perception, defence electronics has already undergone a paradigm shift due to the participation of private players along with public sector units (PSUs), even though a major part of the market is yet to be explored in the country.

DOES INDIA HAVE THE MANUFACTURING CAPABILITY?

As the world’s largest arms buyer, India increased its arms imports by 111 per cent over the past five years and currently accounts for 14 per cent of the world’s arms imports. “Strategic electronics sector cannot depend on imports. It requires a very high level of quality in terms of input materials, production processes as well as end testing. If India increases its strategic electronics production, it will be a good exposure for domestic manufacturers,” says N Ramachandran, managing director, MEL Systems and Services Ltd.

Alternative to import dependence: Manufacturing of defence products in India was opened up to private and foreign players in 2001. Till then, only defence PSUs like Hindustan Aeronautics (HAL), Bharat Electronics Limited (BEL), Bharat Dynamics Limited (BDL), etc, manufactured defence equipment in the country. These companies currently account for about 20 per cent of the Indian defence equipment market. But with the introduction of the defence procurement procedure (DPP) in 2002, which was further amended in 2006, a handful of private companies like Tata Motors, L&T and Mahindra Aerospace have forayed into this sector. This is a paradigm shift in the area of strategic electronics production in India. However, the private sector is estimated to have a relatively small share—just 5 per cent–of the defence equipment market. So the major part of India’s needs, over 70 per cent of defence equipment, is still met through imports.

India’s total imports of defence equipment amounted to a mammoth Rs 400 billion in 2013, and this huge market can now be tapped by the private companies also. The Indian government has stressed on the need for indigenisation in design, development and production of defence equipment in the Defence Procurement Policy announced in 2013. Between 2004 and 2013, the government issued 209 licences to Indian companies to manufacture defence equipment domestically. The pace of granting licences has also picked up over the last five years.

Indian manufacturing capability: It is quite clear that 70 per cent of the demand, which is now being met through imports, can be tapped by the private manufacturers, though currently, only 5 per cent is being catered to by them. So, do these private companies lack the capability? According to industry insiders, India definitely has the manufacturing capabilities and the infrastructure for electronics, mechanical or optoelectronics. But unfortunately, right now, we lack the technology and design capability for strategic electronics. So we need to borrow the technology. Even the technology that India has transferred is outdated.

Says Vedaprakash G, general manager, business development, Centum Electronics Ltd, “ Centum has made significant investments to establish design and manufacturing capabilities for the defence and aerospace segments since 2006 and we have begun to see the benefit through offsets contracts with international defence companies as well as domestic strategic customers. We now have a strong capability to manufacture various complex electronic subsystems here in India. Going forward, Indian companies will need to evolve by continuing to invest in design and developing state of the art products. There are only few good Tier II players in this segment.” Centum, a leading globally renowned electronics company, develops and manufactures high reliability electronic products such as missile guidance subsystems, on board computers, power subsystems, launch vehicle subsystems, flight electronics and frequency control products to the stringent requirements of defence and ISRO.

Adding to this, Rajoo Goel, secretary general, ELCINA, says, “In our country, there is sufficient indigenous capability to manufacture superstructures, containers, hydraulics, electromechanical assemblies, etc. However, we lack the capabilities required for the core electronic segment of combat systems, where we are still dependent on foreign manufacturers. While noticeable growth has been seen in Tier I and III vendors, we have been lagging behind in exploiting opportunities in the Tier II category, which contributes significantly to the overall cost of strategic systems.”

However T Vasu, director, Tandon Group, states, “Today the Ministry of Defence (MoD) aims to create conditions conducive for domestic manufacturers, both public and private, to play an active role in this domain. It now aims at expediting decision making, as well as simplifying contractual and financial provisions to establish a level playing field for the Indian companies. However the implementation is not absolutely industry friendly. There should be more of a win-win situation than the existing one.”

Rise in domestic manufacturing: Despite all the limitations, strategic electronics manufacturing in India has been growing steadily. From Rs 57 billion in 2007-08, it was projected to touch Rs 120 billion by the end of 2013 (confirmed figure still not available) and exceed Rs 140 billion during 2013-14. This high potential emerged particularly after the revised Offset Policy was announced in 2012, offering greater opportunities to indigenous electronics manufacturers. The Offset Policy allows companies to supply strategic electronics equipment in collaboration with MNCs, on the condition that sufficient value addition is done locally. The new Offset Policy mandates foreign defence equipment vendors to source 30 per cent of the contract value, locally, if their order value exceeds Rs 30 billion. This should definitely spur domestic production of strategic electronics.

However, not many can venture into the strategic electronics domain, as the MoD has strict rules relating to procurement, defined under the defence procurement procedure (DPP) introduced in December 2002. The DPP, which was amended in 2006, mandates that the suppliers of defence electronics products or equipment have to sign pre-contract integrity pacts with the government.

Meagre contribution from MSMEs: The amended DPP also was to act as a catalyst to enhance the potential for micro, small and medium enterprises (MSMEs) to be part of the indigenisation drive, as well as help in broadening the defence R&D base of the country. Yet, the contribution of the MSMEs is meagre. Says Col K V Kuber (Retd), advisor, aerospace, defence and homeland security, NSIC, “MSMEs are not yet capable of making a tank, a gun or an aircraft. They can only do less critical tasks such as fabrication, painting, limited machining or making small parts. So talk of direct participation of MSMEs in the defence sector is far fetched. To contribute significantly in this sector, MSMEs have to work as a group, like one firm doing the machining, another fabrication, and yet another assembling the product. Together, they can develop the complete product.” In fact, BEL’s supply chain includes 300-400 MSMEs.

Also, defence contracts take a long time to execute—maybe even two years. It becomes difficult for an MSME to wait that long. MSMEs are already doing sub-systems for PSUs.

T Vasu is of the opinion that the policies should be made conducive for the MSMEs to participate as a large number of them can contribute to the defence requirements, particularly in manufacturing. “The strict ‘no cost, no commitment’ (NCNC) terms of the policy, kills (NCNC) in the policies kills the motivation of the MSMEs. In many cases the expense involved in proof of concept, demos and field trials simply go waste and further discourages the companies from participating in defence business,” he adds.

IMMENSE BUSINESS OPPORTUNITIES

An increased budgetary allocation for the armed forces, the army’s plans to replace old equipment, and compulsory sourcing of Indian components by foreign defence equipment vendors are some of the key drivers for the growth of India’s strategic electronics industry, which holds immense business opportunities.

Over the next 10 years, the government is planning on acquiring defence electronics worth US$ 150 billion. Recently, addressing the 5th edition of the Tamil Nadu Manufacturing Summit, organised by the Confederation of Indian Industry (CII), A Sivathanu Pillai, chief controller (R&D), Defence Research and Development Organisation (DRDO), said, “The requirements of the defence sector are opening up opportunities worth US$ 150 billion for the industry, and out of this, over $ 100 billion is open to Indian companies. The figure has been arrived at based on the main orders expected by DRDO during the period mentioned,” he said. DRDO is developing products for orders worth Rs 160 billion, and many of its projects are in the completion stage. Hence, it is looking for companies that have the capability to supply to the organisation.

Huge market potential: Observing the huge potential ahead, domestic as well as global private sector companies are making inroads into the strategic electronics market. Of late, domestic companies that made only small parts have started developing in-house capabilities. While a large number of foreign companies are present in this space, Indian companies like Tata Motors, Larsen & Toubro (L&T), Bharat Forge and Ashok Leyland are also making their presence felt in this domain.

Says N Ramachandran, “This domain has enormous potential for manufacturers because, over the last six months, the government has made a commitment that it would like to have more and more defence production happen in India. Many new tenders have been announced to give primary importance to Indian manufacturers.” The government is committed to cutting down on imports for two reasons—first, it is expensive to import; and second, the products and systems are really strategic in nature.

It is not possible for the PSUs to cater to this huge demand. Moreover, many of them do not even have all the capabilities to do so. For instance, HAL doesn’t have design capabilities and does licensed production. On the other hand, only HAL has aerospace capabilities. This creates a lot of space for the private companies to step into.

Those who enter this domain will surely be around for 20 to 25 years. That’s the kind of sustainability to be expected. This sector can ensure profitable business for companies that are into design, custom-built products, contract manufacturing, component manufacturing, systems integration, etc.

Contracting: This is a big opportunity for private firms and OEMs. For example, Tata Power Strategic Engineering Division (SED) is a prime contractor of the Ministry of Defence (MoD) for indigenous defence electronics production. In 2011, it bagged a Rs 9500 million contract from the Indian Army to manufacture two electronic warfare systems. The company won another Rs 11,700 million contract to modernise 30 Indian Air Force bases. It has the ability to design, develop, manufacture, assemble and upgrade mission-critical systems. In 2012, Bengaluru-based Centum Group took up a contracting order to supply to Europe-based defence solutions provider, Thales and added a few more international strategic customers like Rafael, L3 and others. Bharat Forge is also aiming to become a major player in the artillery and specialised vehicles segment. Bengaluru-based Dynamatic Technologies makes assemblies of vertical fins for the Sukhoi 30 Mk-I fighter bombers.

Several other small companies like Avasarala Technologies, DefSys, Ravilla and Taneja Aerospace have acquired advanced technological capabilities and will be able to upgrade from making parts to developing entire systems.

Three types of contracts: In defence contracts, there are three types of manufacturing. In ‘build-to-print’, the contractor manufactures according to designs provided by a client. While in 2010, 92 per cent of the private sector’s orders that came to India were for build-to-print, this figure has dropped to 80 per cent in 2014.

In the second variety—’build to specifications’—the project executor owns the intellectual property. Here, the client provides the idea of a product, and the executor manufactures based on that. Often, these products require developing new intellectual property that may belong to the Indian contractor.

The third type of manufacturing involves developing products from scratch, either to create new capabilities for a particular defence need or to upgrade an existing product.

“Indian manufacturers have now started building capabilities in the second and third categories. The Indian private sector has taken big strides forward, technologically, in the last few years and can now match international standards,” says Pavan G Ranga, CEO, Rangsons Electronics Pvt Ltd.

Maintenance, repair and overhaul: Maintenance, repair and overhaul (MRO) for aerospace and defence equipment is a big opportunity for private firms and OEMs. Most major equipment remains in service for two to three decades. MRO facilities can be established in the private sector or with OEM participation. However, there is a growing awareness within the Indian defence establishment regarding the value of outsourcing non-core maintenance activities to third party operators. Major global aviation industry firms are already eyeing the market in India. The revised DPP provides the opportunity to establish public-private partnerships for MRO.

Despite the exponential growth projected for the MRO business in India, the country has still not sorted out the certification issues related to training the required workforce. The certification, given by the Directorate General of Civil Aviation (DGCA), is not yet comparable with mandatory European standards. The DGCA is now in the process of making its certification equivalent to the European Aviation Safety Agency (EASA), which is mandatory for MROs that hope to service the international airlines.

Offset partnership: As per the terms of the DPP 2006, there is an option to offset up to 30 per cent of the total foreign exchange the government spends. It involves the foreign vendor being contractually obliged to export products (in order for India to recover a percentage of foreign exchange), components and services; make investments in industrial infrastructure for services, co-development, joint ventures and co-production of defence products and components.

Domestic companies can target the offset areas where there are immense opportunities. OEMs from US and EU are proactively looking for Indian offset partners (IOPs) with technological capabilities, capacity and IPR process maturity. Additionally, business opportunities through offset for systems design, engineering and testing services can also be targeted by domestic companies. As an example, an induction of 300 helicopters will provide offset opportunities, apart from subsequent MRO requirements.

System and sub-system integrators: Systems integration with outsourced components and sub-systems is the most viable business option in this segment. All major defence contractors are usually integrators who procure components, sub-assemblies and sub-systems from the MSMEs to configure defence systems as per the parameters prescribed by the buyers. For example, India’s ambitious project F-INSAS (Future Infantry Soldier as a System) entails integration of multiple technologies. Hence, vast opportunities exist for domestic as well as foreign MSMEs.

DRDO has been at the forefront of missile development with its Integrated Guided Missile Development Programme. Some of these missiles may be co-produced in India by the public sector. Hence, there is an opportunity for the private sector to indigenise sub-systems or manufacture them with the transfer of technology (ToT).

However, Pavan G Ranga says, “Systems integration no doubt is a good business opportunity, but more important is the core engineering and core technologies that need to be developed in the country. Moreover, the integrators need to add value; otherwise it is not a sustainable business model.” He is of the opinion that sub-system manufacturers have the biggest business opportunities. “About 50 per cent of the manufacturing opportunities will comprise components and sub-systems manufacturing. It is a huge opportunity that players are looking at,” he says.

T&M device suppliers: The increase in indigenous design and manufacturing of aerospace and defence systems has resulted in a growing demand for high performance, state-of-the-art test and measurement (T&M) equipment. There is a demand for commercial off-the-shelf (COTS) equipment that satisfies military (MIL) standards in the strategic electronics segment.

“T&M equipment and solutions for aerospace and defence are based on advanced technology for use in radar installations, electronic warfare, military communications, satellites, guidance, avionics, intelligence, surveillance and beyond,” says Gautam Awasthi, general manager, marketing, Agilent Technologies (now Keysight Technologies).

Other opportunities: Besides the above opportunities, there is a US$ 50 billion opportunity in the electronics system design and silicon fabrication space requiring high end technology transfers in the next 10 years. Homeland security, environmental technologies and training services are another big slice of the pie that is estimated to be worth US$ 2.5-10 billion, within a similar time frame.

Defence projects open up opportunities: Currently, there are a number of defence projects that will lead to vast business opportunities. For example, the Tactical Communication System (TCS) for the Indian Army, which has been in the planning stage for over a decade, is an Internet protocol-based mobile system. This programme will truly open up new opportunities to the private sector.

FINSAS, a multi-billion-dollar project, is being steered by DG Infantry and DRDO, along with private sector partners actively involved in indigenous development.

The Indian Navy’s modernisation plans include the acquisition of naval weapons, which would require radars, sonars, sensors, etc. Most of these will be provided by BEL, with private sector participation.

CHALLENGES AND ROADBLOCKS

Although sustainability is very high in this domain, breaking into this industry is very tough, as the entry barriers are extremely high. At a seminar on strategic electronics, Dr Ajay Kumar, joint secretary, Department of Electronics and IT (DeitY), Government of India, had said, “Companies in the defence sector require patience, perseverance and determination to make it. But all those who have made it, unanimously believe that having attained the ability to participate in defence tenders has been a good experience.”

Difficult procurement procedures: The procurement procedures are very difficult to crack as there are a number of agencies that deal with just one procurement. “It is easier to export defence components, as there are some impediments that Indian companies face when it comes to participating in MoD tenders,” says Col K V Kuber.

“The government should make the whole process more transparent, and announce what equipment they would need in the next 10 years. They should make this public,” says N Ramachandran.

Huge capital expenditure: Venturing into the strategic electronics industry requires huge capital expenditure in the initial years, which is a constraint for startups and small companies. Once a company starts doing well in this domain, it can foray into the export market as well.

Lack of cutting-edge technology: Cutting-edge technology is required for defence products, which is not available in India. Hence, a lot of technology has to be acquired from abroad, which is expensive. The acquisition process requires heavy investments and a long waiting period. “Companies need to have deep pockets to do business in the defence sector,” says N Ramachandran.

Slow tender process: The tender cycle in Indian defence contracts sometimes takes too long for closure— up to 18-24 months. In order to encourage private players’ active participation in defence opportunities, this should be kept to within a reasonable ‘start-end’ period. “A company has to invest in technology, infrastructure and then bid in projects. Projects are decided on the basis of the lowest cost quoted. If a firm does not get that particular business, it has to wait for another cycle,” states N Ramachandran.

Need for testing infrastructure: There isn’t a good test infrastructure for strategic electronics, barring the labs within government premises such as at BEL, which are always occupied. The government should set up a number of testing centres, feel industry experts.

Policy raises confusion: Although the industry finds the offset policy to be an excellent initiative by the government, they feel that it needs to be made simple enough for all to understand. For example, many in the industry are unable to participate in the process because of the confusion over issues like whether or not they require an industrial licence.

Critical tax issues: Tax issues are extremely critical for defence products. If a vendor imports equipment, it does not pay any duty but if it buys from a domestic manufacturer, it needs to pay tax. So experts feel that all indirect taxes for the defence sector must be eliminated.

INDUSTRY’S RECOMMENDATIONs TO GOVT

Although the government has taken a number of positive steps, many limitations and roadblocks in the procedures remain. “No foreign player would be interested in investing in this sector because of the 26 per cent FDI cap, which should be increased to 45 or 50 per cent,” says Vedaprakash G.

The following are some of the recommendations of the industry.

Ecosystem to support indigenous defence products: The Indian government has to pledge to build an ecosystem to support indigenous defence products with a clear roadmap. All ICTE programmes that are non-platform/non-weapons-based need to be opened up for the industry’s participation on a competitive basis so that products can be developed locally and sold globally. There should be no PSU reservations.

Clear roadmap for import reduction: Though immediate reduction in imports is quite difficult, channelised imports are important to boost self-reliance in strategic electronics. A clear roadmap towards import reduction by the MoD needs to be published and audited by the CAG, with aggressive targets for the ICTE sector.

Investments in components and composites: It is clear that India needs investments in components and composites. So, wherever such investments come with a control on full intellectual property rights, no ‘end-use’ restriction should be imposed to ensure more participation of Indian firms in strategic electronics.

Faster decision-making processes: ELCINA had requested the government to ensure that the decision-making process is faster, as MNCs are unable to wait for too long. There are instances when it has taken four-five years from the proposal stage of a project to the contract-signing stage. In this process, a lot of extra costs are incurred due to the time overrun. “While the Offset Policy has opened up opportunities for the Indian industry to participate in defence business with foreign OEMs, the delay in the decision making process is a big hindrance in winning business opportunities,” says T Vasu.

Through a research paper on ‘Opportunities Landscape in Strategic Electronics’ prepared by ELCINA and IESA (India Electronics and Semiconductor Association), the industry has made certain recommendations to the government.

Short-term recommendations

• To encourage and provide avenues for India-based design/manufacturing houses to compete with foreign players (Taiwanese/Korean/Chinese) through government incentives/preferences, such as waivers in taxes/duties, etc.

• Right to information (RTI) coverage should be provided for business opportunities in defence so that transparency is established while evaluating and choosing a service provider in a tender situation.

• Encouragement should be given to build industry-academia partnerships. These should be structurally covered and R&D initiatives must be compulsory.

• R&D in academic institutions should be encouraged in areas of strategic interest.

• The government should allow 49 per cent FDI in the defence sector to usher in growth in domestic defence production.

Long-term recommendations

• To provide avenues for capability building in blending horizontal services with vertical’s business needs which are currently imported, for example, telematics, navigation systems in automotive industry.

• To send students abroad under subsidy to study in designated strategic areas, and ensure their return and employment in the strategic electronics industry.

• Maintain active contacts with NRIs working in strategic areas and create an environment for them to return to India.

• DPSUs should outsource more and more sub-systems and assemblies to the private sector.

• To create a ToT monitoring cell with competent people from DPSUs, private industries, DRDO and academic institutions, and empower them to effectively monitor and implement the ToT process.

A detailed ToT proposal specifying the technology to be transferred and the step-by-step mode of transfer has to be mandated in all large value purchases.

• To set up a National Defence Design University (NDDU), exclusively for studies and R&D in critical technologies for defence and the design of futuristic weapon platforms.

• Promote FDI in high cost, high technology components such as chip/processor manufacture under strict monitoring control. MoD to provide funding to private companies that are into R&D dedicated to the nation’s defence, like how the US Defence Department funds private organisations that are in defence R&D in the US.

• To provide incentives/waivers of taxes to Indian design/manufacturing houses should they set up a manufacturing facility to indigenously manufacture a product supplied by the OEM.

ELCINA’s research paper ‘Opportunities Landscape in Strategic Electronics’ also pointed out a few other actions that can be actively considered by the strategic electronics industry:

• Creation of infrastructure for manufacturing of components—complex PCBs, SMDs, FPGA-based microprocessors, etc, catering to domestic as well as export markets under strict monitoring control.

• Collaboration with leading OEMs on a ToT/JV basis in niche technology areas.

• Collaboration with academic institutions/sponsoring projects to gain technologies.

• Creation of in-house R&D facilities, either independently or jointly with other vendors.

• At the Tier II and III levels, a few vendors have already been associated with defence production. They need to convert their experience into 100 per cent indigenisation and scale up to reach the Tier I category. Simultaneously, effort must be put into building expertise in newer technologies and venturing into limited production rather than waiting for the current technology to mature and again getting into the loop of importing.

HOW SES SUPPORTS DEFENCE ELECTRONICS SECTOR

The idea of a Strategic Electronics Summit (SES) was mooted by ELCINA five years ago. It has grown to become a platform that brings together all the stakeholders of the strategic electronics sector to explore untapped opportunities. “The Defence Offset Policy and DPP have opened up a host of opportunities which the domestic industry must seize. The objective of SES is to highlight these opportunities to all industry players keen to gain from and contribute to the growth of the strategic electronics industry in India, and enable greater domestic value addition and indigenisation,” says Rajoo Goel, secretary general, ELCINA. The fifth edition of the SES will be held from July 30-31, 2014 in Bengaluru. “The production of strategic electronics in India has been growing steadily year on year but is still insufficient to meet local demand. It can safely be said that the value of the electronics alone will rise faster than the total value of the strategic equipment and thus become more and more important, strategically as well as commercially,” says Rajoo Goel. Objectives of the SES: SES aims to bring all stakeholders on to one platform to enable better communication and to understand the defence establishment’s requirements. Its vision is to create indigenous capabilities to manufacture defence equipment; hence, it makes an effort to highlight new policy initiatives. One of the key objectives of the SES is to involve the MSMEs, and encourage them to meet the requirements of the defence sector. Fifth edition of ELCINA SES: “The fifth edition of the SES will be of great relevance as, in the last six months, the mood of the government has dramatically changed regarding its role in boosting domestic manufacturing,” says Rajoo Goel. “Government wants to focus on ‘made in India’ products. To transform this thought into action, the SES will play a major role—by providing a platform for the stakeholders to meet and debate over ideas on how to take the sector forward. This exhibition also showcases the capabilities of the existing units, and will inform people about what’s new in the market,” says N Ramachandran, MD, MEL Systems and Services Ltd. SES also has NSIC (National Small Industries Corporation) as a participant; hence, many micro, small and medium establishments will display their products at this event. “MSMEs might not make too many strategic electronics parts at the moment, but they are very much into electronics. So, if they can get the right business opportunities, they can contribute more to this sector. SES is a good platform to provide them these opportunities,” says Col K V Kuber (Retd), advisor, aerospace, defence and homeland security, NSIC. For more details on the event, visit www.elcina.com

TURNING CHALLENGES INTO OPPORTUNITIES, DRDO HAS DEVELOPED INDIGENOUS AND INNOVATIVE TECHNOLOGIES FOR INDIAN DEFENCE SECTOR

By Ravi Kumar Gupta, scientist G & director, directorate of public interface, DRDO Electronics is a key area of defence technologies, and is a very important part of nearly all the weapon systems, platforms and equipment designed and developed by the Defence Research and Development Organisation (DRDO) for the Indian Armed Forces. DRDO translates the products it designs and develops into manufactured items that are used by the defence forces, with the help of manufacturers in the public (ordnance factories, DPSUs such as BEL, ECIL, etc) and the private sectors. DRDO has close associations with over 800 industries that include a large number of SMEs. DRDO and the Indian defence sector had to pass through a tough phase for several decades due to the lack of a strong industrial base in the country, inadequate testing and infrastructure facilities, and the shortage of trained/skilled human resources. The situation was further complicated with the sanctions imposed by the West that followed Pokhran I and Pokhran II, as well as the launch of the indigenous ballistic missiles. Turning these challenges into opportunities, we went on to develop indigenous and innovative technologies. Today, we have achieved a very high degree of self-reliance in many crucial areas such as radars, sonars, navigation systems and sensors, high performance computing (hundreds of teraflops), among others. These developments have also led to a quantum leap in the growth of Indian industries. Today, the production value of the electronics systems designed and developed by DRDO, which are being manufactured by the Indian electronics industry, amounts to more than Rs 250 billion. And this figure is rising rapidly. Thus, the defence electronics sector in the country, led by DRDO, is poised for rapid growth with the active participation of Indian industry. DRDO has 11 laboratories engaged in R&D, which are related to various facets of electronics and its applications. Thus, from the design and development of solid state materials, devices, microwave tubes, microprocessors, communication systems, command and control systems, radars, electronic warfare systems and electro-optical systems, to advanced computing, artificial intelligence and robotics–DRDO’s R&D activities cover it all. In addition, about a dozen other DRDO laboratories—which are developing systems and applications for aerospace, combat vehicles, combat engineering and the navy—have highly qualified groups working in specific areas of electronics related to their requirements.

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