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Explain the prominence of defence offset policy in India and also assess the effect of the recent amendments on the policy objectives.

Topic : Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment. Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

5. Explain the prominence of defence offset policy in India and also assess the effect of the recent amendments on the policy objectives. (250 words)

Reference: The Hindu 

Why the question:

The article highlights the government’s dilution of the “offset” policy in defence procurement.

Key Demand of the question:

One must explain the significance of Defence offset policy in India and discuss the effect of recent amendments of it on the policy objectives.

Directive:

Explain – Clarify the topic by giving a detailed account as to how and why it occurred, or what is the particular context. You must be defining key terms where ever appropriate, and substantiate with relevant associated facts.

Structure of the answer:

Introduction:

Start by explaining what an offset policy implies.

Body:

The offset policy, introduced in 2005, mandates foreign suppliers to spend at least 30% of the contract value in India. The policy was adopted on the recommendations of the Vijay Kelkar Committee.

List down the objective of defence offset policy in detail. The key objective of the defence offset policy is to leverage capital acquisitions to develop Indian defence industry by fostering the development of internationally competitive enterprises domestically, augmenting capacity for research, design and development related to defence products and services and partially compensating for a significant outflow of the country’s resources in the large purchase of foreign goods.

Then explain the significance of it. Give examples.  

Hint at the possible challenges involved in practicing such a policy.

Conclusion:

Conclude that the offset policy can play a vital role in the growth of a vibrant domestic defence sector, if it is designed and executed correctly, as is evident from the experience in the aerospace sector.