India’s Defence Exports

SYLLABUS:

GS 3 > Science and Technology   >   Defence technology   

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REFERENCE NEWS:

• Recently, the Defence Minister announced that defence exports have crossed ?21,000 crore (approximately $2.63 billion) for the first time in the Financial Year (FY) 2023–24, which is a spectacular growth of 32.5 percent over the previous fiscal.

MORE ON NEWS:

• The defence Industry, including the private sector and Defence Public Sector Undertakings (DPSUs), have made tremendous efforts in achieving the highest-ever defence exports. The private sector and the DPSUs have contributed about 60% and 40% respectively.
• The recent figures indicate that defence exports have grown by 31 times in the last 10 years as compared to FY 2013–14.
• A comparative data of two decades i.e. the period from 2004-05 to 2013-14 and 2014-15 to 2023-24 reveals that there has been a growth of 21 times in the defence exports.

INDIA’S DEFENCE EXPORTS’ STATUS:

• The Government has set an ambitious target to achieve exports of about Rs. 35,000 crore (USD 5 billion) in aerospace and defence goods and services by 2025.
• The Stockholm International Peace Research Institute (SIPRI) ranked India at number 23 in the list of major arms exporters for 2015-2019. India accounts for 0.17 per cent of global arms exports. However, recent data from SIPRI for the period 2018-2022 indicates that India was not listed among the top 25 arms exporters.
• India is expanding its defense manufacturing ambit, uniting big corporates like L&T, Godrej, and Adani and PSUs with startups and research entities to create a vast array of military equipment. The nation has listed for sale an extensive portfolio of military hardware, including BrahMos missiles, Light Combat Aircraft (LCA), helicopters, warships, artillery guns, tanks, radars, and electronic warfare systems among other advanced weapons systems, marking a significant stride in its defense capabilities and technology export potential.
• India's defence exports have diversified geographically, with exports reaching countries such as Italy, Maldives, Sri Lanka, Russia, UAE, Poland, Philippines, Saudi Arabia, Egypt, Israel, Spain, Chile, among others.

INDIA’S OPPORTUNITIES IN DEFENCE EXPORT:

• Competitiveness: Frugal engineering, high-quality engineering talent and strong IT infrastructure provides India an opportunity to progress in the area of defence manufacturing and exports.
• Growing indigenous manufacturing capabilities: According to SIPRI, three Indian Public Sector Undertakings (PSUs)—Hindustan Aeronautics Limited (HAL), Ordnance Factory Board, and Bharat Electronics Ltd (BEL)—were listed among the world's top 100 arms-producing companies in their 2022 rankings.
• Policy support by government: The Atmanirbhar Bharat Abhiyan has underscored the need for self-reliance to meet India’s security needs and defence exports is a pillar in the drive to attain self-sufficiency in defence production.
• Rising demand in Indian Ocean Region: Chinese aggressions in Indian Ocean region have increased the demand for arms among South East Asian countries. For example, in a historic deal, the Philippines became the first country to purchase BrahMos supersonic anti-ship missiles from India in 2022, aimed at enhancing its defense capabilities amid South China Sea disputes with China. The delivery of these missiles to the Philippines is expected in April 2024.
•  Cordial relations with major players: India maintains good relations with major arms traders like USA, France and Russia. This has enabled India to strike deals which involves technology transfer and capacity building in defence equipment manufacturing.For example, recently, India and France have agreed to jointly produce a multi-mission helicopter in India, and French engine maker Safran is willing to transfer 100% of its technology to build fighter jet engines in the country. Also, India-Russia AK-203 rifles deal, where 20,000 rifles will be imported from Russia, and more than six lakh rifles will be manufactured in India by a special purpose Joint Venture called Indo-Russian Rifles Private Ltd (IRRPL).  

SIGNIFICANCE OF DEFENCE EXPORTS:

• Make India a manufacturing hub: Defence exports adds impetus to the efforts to meet the ambitious target set by the Government to achieve a manufacturing turnover of USD 25 billion or Rs.1,75,000 crore by 2025.
• Defence indigenization: According to SIPRI, India was the world's top arms importer for the period 2019–23, with imports having gone up by 4.7% compared to the period 2014–18. Defence exports will lead to the development of strong indigenous manufacturing capabilities, especially in the MSME sector, and can help reduce India’s reliance on import.
• Enhance bilateral relations: As the deal is finally through with the Philippines, other countries like Malaysia, Thailand, Vietnam and Indonesia, who have shown interest in acquiring the anti-ship missile, could also come onboard. This can help strengthen India’s bilateral ties with South East Asia.
• Enhance domestic R&D: The domestic defence industry would have limited scope for investment in R&D if it relies only on the domestic demand. The strong competition in defence exports can help bring investment and innovation into defence manufacturing.
• Geopolitical significance:India is increasingly reaching out to countries in the Indian Ocean Region (IOR) and ASEAN that mostly depend on China for defence procurements, and is positioning itself as a more “reliable security partner” and as an “alternative to China”.

CHALLENGES IN DEFENCE EXPORTS:

• No unified efforts: India’s MoD so far has no dedicated agency to drive exports. Exports are left to individual corporations, like BrahMos, public shipyards and private entities.
• Stiff competition: The US, Russia, France, Germany, China and Israel are established players in the international arms market. India needs to develop cutting edge products and competitive prices if it is to compete as a major exporter.
• Weak economy: In order to achieve the target of USD 5 billion, defence exports have to grow at over 40 per cent until 2024. This would be a challenge in the post-pandemic economy.   
• Limited R&D capabilities: Compared to the US and China which spend in excess of 10 per cent of their defence budget on R&D, India spends around 5-6 percent. Also, the lack of incentives has resulted in low priority being given to R&D. For instance, the R&D spending in OFB was as low as 0.7-0.8% of their turnover.
• Import dependency: Technology transfer has been India’s major policy mosaic to build major systems and platforms. Hence, manufacturing continues to be based on foreign design, rather than indigenous design.
• Chances of corruption: Defence deals in India have always been controversial, with allegations of corruption and crony capitalism. This arises because of the lack of an organizational structure with well-defined procedures and robust overview mechanisms. 
• Ethical issue: Defence export is a business model the feeds on armed conflict, violence and instability. Also, there are several countries in Asia and the Middle East having issues related to human rights. The weapons could also end up in the wrong arms, like terrorist outfits. Hence, the export of arms by India could be considered as against the principle of non-violence and peaceful coexistence.

WAY FORWARD:

• A dedicated agency: An agency dedicated for promoting defence exports could be established. Its aim should be to identify global export opportunities and link them with Indian domestic manufacturers. It should consist of scientists, bureaucrats and defence industry players.
• Encourage private players: Private players are crucial in the development of defence manufacturing and export. To further encourage them, efforts like Product Linked Incentives could be looked into.
• Government support for industries: In order to increase exports, the MSME manufacturers would need handholding from the government. The larger industries need assistance in identification of global opportunities and bureaucratic support for facilitating easy exports.
• Investment in capacity building: For India to boost its defence export, it must invest in domestic capacity building, innovation, and joint collaborations. A separate intellectual property regime for defence related innovations can also be created.

PRACTICE QUESTION:

Q. Examine India’s prospects and challenges in emerging as a major defence exporter? (15 marks, 250 words)