Where India Stands In World Arms Bazaar As Defence Exports Reach All-Time High And $100 Bn Orders Likely In Next Decade
To expand its footprint in international arms market, India needs to adopt a multipronged approach, first by roping in the private sector and then attracting overseas defence giants to open shop here.
India achieved a record Rs 16,000 crore worth of defence equipment exports last financial year. The country may be far away from establishing a significant footprint in the international arms market, considering a poor track record, the defence establishment is upbeat over its rising penetration in the world market. From Rs 1,941 crore in 2014, the country increased the value eight times to export defence-related goods worth almost Rs 16,000 crore (US$ 2 billion) last year. Though that was a meagre 0.2 per cent of the transactions that took place in the world arms bazaar last fiscal, the leap has enthused the Indian defence establishment. Efforts to increase defence exports have started to yield positive results, and India has set an ambitious target of US$5 billion worth of annual exports in the next five years.
“Our government will keep supporting efforts to make India a defence production hub,” Prime Minister Narendra Modi recently said in a tweet. According to Ministry of Defence, India is now exporting defence ecquipment to over 85 countries. "Indian industry has shown its capability of design and development to the world, with 100 firms exporting defence products at present,” it said in a recent statement. These exports include the Supersonic BrahMos cruise missiles, Advanced Light Helicopters, multi-barrel rocket launcher Pinaka, light weapons , ammunitions etc.
Excellent! A clear manifestation of India’s talent and the enthusiasm towards ‘Make in India.’ It also shows the reforms in this sector over the last few years are delivering good results. Our Government will keep supporting efforts to make India a defence production hub. https://t.co/AL3sLknFOL
— Narendra Modi (@narendramodi) April 1, 2023
New Wave Of Militarisation
In spite of rising exports, however, India is still the biggest arms importers, though its share in arms imports has gone down to 11 percent in 2017-22 from 12 percent in 2011-2016. India continues to be an attractive selling destination, and as revealed by Defence Minister Rajnath Singh, the Indian defence sector has emerged as a major demand creator. "Orders worth over $100 billion are expected in the next 5-10 years,” he said last month.
This is a conservative estimate. In reality, the Indian armed forces would be requiring much more, as its weapon inventory is getting outdated very fast. In view of the rising security challenges from the neighbourhood, India cannot entirely depend on Made in India products and undermine the defence preparedness vis-a-vis China and Pakistan.
The country had in the past seen only a half-hearted focus on the development of export-led defence industry, though it created huge infrastructure of designing and producing defence equipment in the public sector, which includes over 40 DRDO labs, eight defence public sector undertakings and over 40 ordinance factories. The excuse for not encouraging defence exports was that these facilities are meant only to cater to the needs of Indian armed forces. Before the new millennium started, the successive governments, in fact as a policy matter, did not allow private sector in defence industry, and prevented them from investing in the defence arena, whereas the public sector defence companies were not encouraged to export their products and services, limited only to so-called friendly countries. However, the dawn of the new century saw the beginning of a gradual rise in the participation of the private sector, which though was initially restricted only to 26%, now permits 100 percent ownership in certain segments.
The world defence industry is set to see a new boom in its order book due to the Russian military invasion in Ukraine, which has created a new sense of insecurity not only among European nations, but in the Asian region also. Since the Russian invasion of Ukraine has changed the geopolitics of the entire world, there is going to be new alignments among nations and new aggressive security policy to safeguard their territories and strategic interests.
From Finland to Poland in Europe to East, South East and South Asia, and the Arab Gulf region to Africa, a new wave of militarisation has begun. Rich countries like Japan and South Korea are planning a heavy increase in their defence acquisition budget, as they feel the need to refurbish their armed forces because of new perceived security threats. India also feels the need to modernise its armed forces. Hence, the Indian defence minister’s assessment of armed forces requirement of US$100 billion.
Will India Be Able To Meet The Demand?
This is quite lucrative for the world defence industry. The issue is whether the Indian defence industry will be able to meet this huge demand of Indian and foreign armed forces. Are we capable of producing cutting-edge weapon systems and platforms that can compete with weaponry in the rival neighbouring forces? If not, can Indian armed forces during a conflict overpower their enemy forces with Indian-made defence systems? The Indian armed forces have to be provided latest weapon systems and platforms, domestic or imported. Indian defence research entities have devoted lot of their energy and time, and has been able to equip Indian armed forces with world class systems like Agni series of Intercontinental ballistic missiles, naval ballistic missiles and Supersonic BrahMos cruise missiles, which India could not have acquired in the era of sanctions. But there are many other multi-billion dollar big-ticket defence equipment like latest generation fighter aircraft, submarines, combat drones etc which the Indian defence industry would not be able to offer presently, though indigenous development works are progressing.
Indian military aircraft designers are moving fast on indigenous production of fifth generation Advanced Combat Aircraft, but real product on the ground is at least a decade away. Indian armed forces need urgent induction of modern generation of fighters to effectively counter the dual China-Pakistan security threat.
The Indian defence ministry wants these new generation fighters to be produced in India with foreign partnership. But there is no visible development. Similarly, the ministry wants the requirement of six diesel submarines to be fulfilled in strategic partnership with a foreign manufacturer. These fighters and submarines would thus be called Made In India product, which can also be produced for export.
As PM Modi has said, India can be production hub of defence equipment, and efforts are being made to attract countries like Japan, Israel, Korea , Gulf nations etc to make India as their production centres to meet the requirements of their armed forces, as India offers qualified manpower. Their advanced technology coupled with capable Indian workers can not only help to meet their own military requirement but also sell their products to Indian armed forces and for International arms market too.
The Ministry of Defence has already set up two defence corridors, one in Tamil Nadu and the other in Uttar Pradesh, where adequate facilities need to be urgently put in place to attract big players in the defence industry. To expand its footprint in international arms market, the country needs to adopt a multipronged approach. First, by encouraging the Indian private sector to join hands with Indian defence research laboratories, and secondly by attracting overseas defence giants to open their shops in India, either in joint venture or in 100 percent ownership. This has the potential of transforming the Indian defence sector and make India a big player in the international arms bazaar.
The author is a senior journalist and strategic affairs analyst.
[Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal.]
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