The government, in approving sweeping changes in the defence procurement procedure that will encourage domestic industry, has taken a right step. Defence minister A K Antony, who chaired the meeting of the Defence Acquisition Council (DAC), which approved the amendments, has said the only way forward for the country is ‘rapid indigenisation of defence products, with both the public and the private sectors playing pivotal roles in this endeavour’. With defence spending in India having grown at about 17 per cent during 2007–2010, India has emerged as the largest arms importer in the world. By 2014, it is expected that India will become the third largest defence spender after the US and China and, with several large equipment and modernisation programs in the pipeline, an overall spend of USD 80-100 billion is likely in the next five years. This makes India one of the world’s most lucrative markets for military products, and defence suppliers are gearing up to compete. Despite this huge market, the policies that have prevailed and structure of the industry has so far constrained domestic defence production. At present, India meets only 30 per cent of its requirements internally, and has negligible exports. In contrast, the United Kingdom, with a similar workforce engaged in defence production is a major exporter in addition to meeting 70 per cent of its requirements domestically. The participation in India of the private sector is even lower at about 10 per cent. The majority of equipment contracts have in the past been awarded to foreign corporations and, due to heavy restrictions placed on it, the domestic private sector has not been able to compete effectively. Consequently, the lack of local research and development in critical defence areas and over-reliance on developed nations for critical technology has posed a potential national security threat. Besides, the involvement of foreign suppliers has meant protracted negotiations, inefficiencies, extensive time and cost over-runs and middlemen. With the Defence Production Policy 2011 having reiterated the strategic and economic importance of self-reliance in the area of defence, developing a strong defence manufacturing sector that will enhance security is a priority. Encouragement of domestic industry will not only reduce reliance on foreign suppliers, but will also create intellectual property and domestic technology capabilities which will have civil applications.