India FDI Defence

Published: 30 January 2023| Version 1 | DOI: 10.17632/gdgk3y8hc7.1
Shreesh Chary


This study looks at the necessity for such self-reliance, assesses the effectiveness of government initiatives to do so, and explores the different variables that affect the degree of self-reliance obtained by a nation. To determine the relationship between factors in the business environment and defence self-reliance, it seeks to develop a theoretical model for defence manufacturing and empirically analyse it. The paper employs an autoregressive distributed lags model to analyse the relationship between capital expenditures, Foreign Direct Investment (FDI) inflows, budgetary allocation for research and development (R&D), and arms imports in India for a period of 25 years in order to achieve its research objectives. It concludes that these elements have a long-term link and that there is a long-term, bidirectional causal relationship between the variables. A bidirectional causal link between capital expenditures and R&D budget was discovered in the short term. It suggests that Defence Public Sector Units (DPSUs) undertake institutional change in order to recruit more competent and qualified people in order to improve India's research and development capacities for the production of armaments. Additionally, it implies that there should be a more effective budget allocation for capital expenditures and that unnecessary revenue expenditures need to be reduced. The Indian government, policy analysts, budget setters, and higher-ups who are able to bring about structural change in defence institutions in order to realise its aim of self-reliance will greatly benefit from the findings of this thesis.



Manufacturing, Foreign Direct Investment, Defence Industry, Arms Race