The new Defence Production Policy would be instrumental in harnessing the combined skills of public and private sector in India, with the aim of achieving self reliance in defence production The new Defence Production Policy would be instrumental in harnessing the combined skills of public and private sector in India, with the aim of achieving self reliance in defence production. This could herald an era of unprecedented defence industrial growth in India. There are huge opportunities for growth within the domestic and global defence & aerospace industries and this policy would help India to enhance its dependence for defence products on indigenous sources and reduce its heavy dependence on imports, currently amounting to about 70% of defence expenditure. The mandate to enhance potential of SMEs in indigenization of defence production as well as to broaden the defence R&D base of the country is a much-awaited announcement, as worldwide, the global OEMs work in close coordination with SMEs. Small and Medium Enterprises offer the advantage of innovative capabilities in niche manufacturing with greater flexibility, lower overhead costs and the ability to learn and absorb new technologies. The private sector hails the announcement and companies are all ready to set up funds to support R&D for defence equipment, systems, and cutting edge technologies that could provide the required encouragement to the defence industry, especially SMEs to invest and develop the sector. The Indian industry is enthused and is very optimistic about it's potential to play a significantly larger role in contributing to the total defence-related production both within the country, as well as export markets. India's defence spending has grown manifold to INR 1,420 bn in 2009-10, of which 40 per cent relates to capital expenditure. Though the Government of India allowed 100 per cent private participation in the defence sector in 2000, it is only now after a decade that the Defence Minister through this policy has clearly laid down the role of private sector in defence production to achieve substantive self-reliance in the design, development and production of equipment and weapon systems. The policy has emphasized the conditions conducive for the private industry to take an active role in defence production. The issues impacting the competitiveness of Indian defence industry in comparison to foreign companies will also be duly addressed and necessary preferences will be given to indigenous development and manufacturing of defence equipment through this policy. The transfer of critical foreign technology to India is essential for realizing our goal of self-sufficiency in defence production. Receipt of technology assets under major procurement is currently the exclusive remit of DPSUs. Hence, it is important that DPSUs necessarily partner with SMEs and help the development of indigenous ancillary industry in India. In the wake of the thrust on indigenous manufacturing, the government may also consider relaxing the cap on FDI in the defence sector to 50 per cent to make it more attractive for the foreign OEMs to part with critical technologies and invest in the growing Indian defence market.