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India's Defence Sector Is Moving In The Right Direction – IMPRI Impact And Policy Research Institute

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India's Defence Sector is Moving in the Right Direction

Harsh V Pant & Suchet Vir Singh

India is still a net importer, but its momentum is in the right direction.

Introduction

India’s defense export revenue touched a record high of Rupees 15,920 crore for FY23. This was more than 10 times New Delhi’s defence export revenue of Rupees 1,521 crore during 2016-17. What makes this export record even more astonishing is that, only a decade ago, India was exporting arms worth a marginal Rupees 686 crore.

Given this context, India’s quantum leap in defense export revenue is substantial and noteworthy. A range of policy, institutional, and technological factors has been responsible for this transition. Essential to the export upswing has been a change in the governmental approach—aiming to reduce the country’s massive import dependency, while pushing the agenda on exports.

Though the rise in defense exports is to be lauded, India remains the world’s largest arms importer. Data from the Stockholm International Peace Research Institute (SIPRI) reveals that India accounted for more than 10% of global arms imports between 2012-17 and 2018-22. During 2012-17, India was the biggest arms importer in the world, accounting for 13% of the global tally. From 2018-22, New Delhi was again the biggest buyer, responsible for 11% of global defense imports.

Despite its recent trajectory, India still has far to go before emerging as a major arms exporter like the US, France, Russia, and Israel. New Delhi will take even longer to create external dependencies on its military-industrial complex like these dominant players. However—despite this gulf—India’s momentum is currently in the right direction.

Fundamental to India’s recent upward export trajectory has been the government’s philosophy to first build a robust domestic defense manufacturing framework and, through this, enhance exports in the long run. This forms a rational and logical approach—without an advanced and developed manufacturing capacity—there will be no inventory in terms of technological quality and quantity to export.

Pivotal to the implementation of this philosophy has been the Defence Production and Export Promotion Strategy (2020). The DPEP has set the tone and tenor for the government’s focus on its defense export agenda. Most significant has been the setting of definitive export targets and benchmarks for the country through the DPEP. Specifically, the government wants $5 billion in defense export revenue by 2025. The target is now the driving force for New Delhi’s export trajectory.

Measures Introduced

Beyond the DPEP, a slew of measures have also been introduced to augment the country’s domestic defense manufacturing capacity. Specifically, multiple positive indigenisation lists have been issued by the government, which mandate specific types of military equipment and spare parts and units to be purchased only from Indian manufacturers. This has been done to create greater market opportunities and incentives for domestic manufacturers. Further, a large proportion of the country’s defense capital procurement budget has been reserved for Indian industry.

While these two policies have been introduced to catalyse the capacity and scale of the domestic defense industry, the government has created liberalised licensing and certification norms to enable defense exports and prevent bureaucratic processes from stifling them.

Beyond these measures, there also seems to be the development of a whole-of-government approach towards promoting defense exports. The Ministry of External Affairs is assisting in promoting Indian defense platforms for exports through their embassies and missions abroad. The government is also providing defense credit lines to foreign countries to assist with sales.

The results of these measures are visible in the export data from the past few years. Government data shows India’s defense exports totaled Rupees 1,910 crore in 2014-15. The revenue increased to Rupees 2,059.18 crore in 2015-16. The export curve then fell to Rupees 1,521 crore in terms of exports for the financial year 2016-17.
Next, the export graph rose to Rupees 4,682 crore in 2017-18 and then surged upwards to Rupees 10,745 crore in 2018-19. There was a Covid-19-induced dip in export value between 2019-20 and 2020-2021 at Rupees 9,115 crore and Rupees 8,434 crore respectively. Between 2020-21, export revenue increased to Rupees 12,814 crore.

While the exact breakup is unavailable, small parts and components form the largest chunk of New Delhi’s defense exports. Radars, thermal technology, and offshore patrol vessels are also part of New Delhi’s defense export portfolio. Another significant element of this export catalogue is bulletproof helmets and jackets. Recently, New Delhi also started exporting dual-use defense technologies. Avionics and fuselage are also part of the exports in the aviation space.

Challenges Ahead

However, India’s defense export trajectory still faces an uphill task in meeting the $5 billion export revenue target for 2025. To achieve this, New Delhi will need to nearly double the current revenue in a year. While this may not be feasible immediately, it will be possible within the next few years. For this, specific challenges need to be dealt with.

First, there is a need for more cohesion between the Ministry of Defense, the armed forces, private manufacturers, and the DPSUs for the promotion and export of indigenous defense products. Specifically, a roadmap to cohesively promote and sell earmarked weapons platforms and systems together in foreign markets needs to be developed.

Secondly, the country must also double down on finding markets for big-ticket platforms like the Light Combat Aircraft Tejas, the indigenously made Advanced Towed Artillery Gun System (ATAGS), and even the BrahMos cruise missile—the exports of these platforms will significantly increase the revenue curve due to the large financial scales involved.

Finally, India has to shed the traditional ambivalence and adhocism that guided its approach to defense exports. It is now essential for the government to continue ideating and implementing institutional reforms to break into the list of top 20 global defense exporters. The results will be significant for the country’s economy and security.

Harsh V Pant is the Vice President for studies, and Suchet Vir Singh is the Associate Fellow (national security and defense) at Observer Research Foundation.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

Read more at IMPRI:

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Acknowledgment: This article was posted by Vamsi Gokaraju, a research intern at IMPRI.

  • IMPRI Desk
  • IMPRI

    IMPRI, a startup research think tank, is a platform for pro-active, independent, non-partisan and policy-based research. It contributes to debates and deliberations for action-based solutions to a host of strategic issues. IMPRI is committed to democracy, mobilization and community building.

  • Harsh V Pant

    Professor of International Relations at King’s College London and Director of Research at Observer Research Foundation (ORF), New Delhi.

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