NEW DELHI: India’s defence exports are on a roll, climbing the Rs 21,000 crore peak in 2023-24. The Ministry of Defence in its statement on April 1 said, “Defence exports have touched a record Rs 21,083 crore (approx. $2.63 billion) in the Financial Year (FY) 2023-24, a growth of 32.5% over the last fiscal when the figure was Rs 15,920 crore. The recent figures indicate that the defence exports have grown by 31 times in the last 10 years as compared to FY 2013-14.”
The ministry attributed the impetus to the joint effort of the private sector and Defence Public Sector Undertakings (DPSUs). While the private sector’s contribution to the export basket is 60%, the share of the DPSUs is 40%. Parallelly, defence export authorisations went up from 1,414 in FY23 to 1,507 in FY24. Though the country doesn’t figure as a big seller in the global arms bazaar yet, the spurt in exports not just lubricates the military-industrial complex and brings in foreign exchange but adds muscle to the sector that is ready to take a bigger leap. That confidence stems from the Indian defence products and technologies gaining global acceptance.
The biggest executed contract, as first reported by this newspaper, was the initial delivery of three Brahmos missile batteries to The Philippines on April 18. It is a $374.96 million (Rs 2,700 crore) contract for a shore-based anti-ship missile system from India.
If one were to compare the last two decades, the volume of defence exports has grown by as much as 21 times. “Total defence exports during 2004-05 to 2013-14 were Rs 4,312 crore, which has gone up to Rs 88,319 crore in the period from 2014-15 to 2023-24,” the ministry said. It attributed the jump to policy reforms and the ease of doing business initiatives, in addition to the end-to-end digital solutions provided to the domestic industries for promoting defence exports. In FY23, the country’s defence production crossed the Rs 1 lakh crore mark for the first time as it reached Rs 1,06,800 crore, a rise of more than 12% over FY22, when the figure was Rs 95,000 crore.
Private sector
The DPSUs and the private sector now export a wide range of platforms, including aircraft, like the Dornier-228, artillery guns, Brahmos missiles, PINAKA rockets and launchers, radars, simulators and armoured vehicles. Officials say there is a rising interest in indigenous products such as the Light Combat Aircraft Tejas, Light Combat Helicopters and aircraft carriers. Besides, Indian skills at maintenance, repair and overhaul (MRO) are drawing international suitors.
About 50 Indian companies in the private sector have contributed to defence exports. Some of their major destinations are Italy, Maldives, Sri Lanka, Russia, France, Nepal, Mauritius, Sri Lanka, Israel, Egypt, UAE, Bhutan, Ethiopia, Saudi Arabia, Philippines, Poland, Spain and Chile. Major defence items that are being exported include personal protective items, Offshore Patrol Vessels, Advanced Light Helicopter, Sukhoi Avionics, communication equipment, Coastal Surveillance Systems, Kavach MoD II Launcher and Fire Control System (decoy system with built-in intelligence to counter the threat of anti-ship missiles), spares for radars, electronic systems and light engineering mechanical parts.
R&D constraints
Research and development (R&D) in the defence sector is an imperative for higher self-reliance and indigenisation. Since defence technology needs long-term investment, its obsolescence is high with low economies of scale. Any policy on maximising indigenous production without a well-supported R&D policy and export strategy would be flawed. Therefore, the defence industrial policy has to be supplemented by the strategy for defence exports without which the economic base of the defence industry would be difficult to sustain.
Yet, a Parliamentary Standing Committee on Defence in 2023-24 recorded a worrying trend of decline in DRDO (Defence Research and Development Organisation) spend as a percentage of defence expenditure. Defence R&D expenditure was 6.59% in the 2010-11, which fell to 5.79% in 2011-12, 5.39% in 2012-13 and 5.34% in 2013-14. R&D share as a percentage of defence expenditure slightly improved to 6.6% in 2014-15 but dipped to 5.89% during 2015-16. In 2019-20, the percentage climbed to 6.23% but subsequently witnessed a free fall. In 2021-22, 2022-23 and 2023-24, it was 5.89%, 5.53% and 5.38%, respectively.
The standing committee was informed by the ministry in December last year that the overall R&D budget is Rs 5,000 crore, out of which about 25% or around Rs 1,300 crore is earmarked for the private sector. Hence, the squeeze on DRDO funds. The committee observed that R&D is a prerequisite for a robust and modern defence mechanism, adding the government must fund in-house projects of DRDO along with outsourcing defence R&D.
Cost of arms import
An independent defence industrial base is an index of strategic autonomy at the international stage. It also helps avert possible coercion by supplier states. India has remained a top arms importer for years. While the country was importing arms and equipment from Russia for decades, it is now sourcing its requirements from various countries, including Israel, France and the US. India became the biggest arms importer in 2007 and has largely maintained this position since 2009.
Gen Bipin Rawat’s policy push
A clear enunciation of the need for Make in India came from the late Chief of Defence Staff Gen Bipin Rawat who in 2017 articulated that the “Indian armed forces must fight the next war with indigenous solutions,” while addressing a seminar. He promoted the DPSUs while not ignoring their shortcomings. Among the biggest problems with DPSUs is their inefficient production line. As such, most domestic weapons programmes, except a few, have overshot their timelines resulting in cost overruns. It forces the country to spend heavily on imports despite a domestic defence industrial base that is yet to fully realise its potential.
Production policy
The government announced a Defence Production Policy in 2011 to achieve substantive self-reliance in design, development and production of equipment/weapons systems/platforms required for defence in as early a time frame as possible; to create conditions conducive for the private industry to take an active role in this endeavour; and to enhance potential of SMEs in indigenisation to broaden the defence R&D base of the country.
While the policy lays emphasis on indigenous production with greater role of the private sector, small and medium enterprises and R&D institutions, its objective cannot be met without a robust export strategy, so as to assure the industry of access to international markets in addition to the domestic market for investing in the sector.
Beginning of Make in India
It was in September 2014 that the Make in India policy was launched to incentivise the sunrise sector to become a manufacturing and production hub. As part of the scheme, the defence sector was identified as an important focus area to make the country self-reliant in arming its military. In conjunction came the plan to also export to friendly foreign countries. Another initiative was the release of five Positive Indigenisation lists by the defence ministry, which categorically ban the import of arms, equipment and systems with staggered timelines.
Role of diplomacy
Defence exports have become a significant component of diplomacy between friendly countries. The exported arms and equipment contribute towards building local operational capabilities, which further enhances interoperability with the forces. Visiting dignitaries bring business delegations along, including those linked to defence manufacturing. India is doing likewise. It has directed its defence attaches posted abroad to scan markets in the host countries for possible export of defence equipment. All this leads to further building of bilateral trust with the importing country. Indian embassies/missions abroad are playing a positive role in promoting the export of defence products.
As exclusively reported by this newspaper in September 2023, the government took the decision to post more Defence Attaches in Africa to enhance ties. It includes posting officers from all three services. The ministry’s Department of Military Affairs and the Department of Defence made efforts in 2023 to post Defence/Military Attaches to countries where they can play a role in understanding the requirements and help with defence exports from both public and private sectors. It’s work in progress.
Biggest global importer
India remained the biggest global importer of arms at 9.8% in 2019-23, up from 9.1% in the 2014-18 period, according to SIPRI. As much as 36% of the imports came from Russia followed by France at 33% and the US at 13%
India’s share of Russian arms imports shrunk from 76% in 2009-13 to 58% in 2014-18 and 36% in 2019-23
The five largest arms importers in 2019-23 were India, Saudi Arabia, Qatar, Ukraine and Pakistan
Arms imports by Pakistan grew by 43% between 2014-18 and 2019-23 and accounted for 4.3% of the world total, making it the fifth largest arms importer globally. 82% of its arms procurement came from China in 2019-23, as against 69% in 2014-18 and 51% in 2009-13