With INR 107.45 billion ($1.54 billion) in arms exports and export authorisations, India met its highest annual defence export goal in 2018–19. India has aimed even higher with a target of INR 300 billion ($5 billion) in defence exports by 2025 after making it into the top 25 exporters of defence goods worldwide for the first time.
Can India really compete with the world’s major defence exporters?
For starters, various reform measures have been taken by the Indian government to encourage the global arms trade. India has a sizable domestic market for producing weapons that, if properly exploited, could make the nation a significant player in the world market for such weapons.
The ambitious goal of INR 300 billion ($5 billion) in defence exports by 2025 was set in the proposal Defence Production and Export Policy, published in August 2020. Can India reach its goal and become one of the top nations that export weapons? What steps would India need to take to achieve its lofty defence export goal? And what has India done to accomplish its goal?
India may respond naturally if someone asks what one or two lessons it has taken away from the ongoing conflict in Ukraine: to push harder for self-reliance in all areas, including the defence industry.
Any discussion or argument in the defence industry should be supported by facts. It is clear from the verifiable facts that India is the biggest importer of aircraft, weapons, and defence technology. Recent years have seen an increase in its spending on the defence industry. It might be the result of increased purchases as well as rising costs.
According to the Stockholm International Peace Research Institute or SIPRI, India is the world’s largest importer of weapons, and Russia is the country that sells the most weapons to India. The top five countries importing weapons between 2017 and 2021 were China, Australia, Egypt, Saudi Arabia, and India. The largest exporter in the world is the United States. Russia, France, China, and Germany are next in line.
From the defence’s memoir
Without first comprehending its past, it is challenging to understand the present or future of the Indian defence sector. India has a long history of being heavily dependent on Russia for its supply of arms.
The first Russian aircraft to touch down here was the cargo transport Ilyushin IL-14. It was a Soviet two-engine cargo, personnel, and military transport aircraft. The first IL-14, Meghdoot-1, was a gift from the Soviet Union to the Indian Air Force. Later, many different versions were bought. 1979 saw the end of the IL-14 service. The amount of goods imported from Russia has grown consistently since 1962. As a result, India has a significant legacy of Russian aircraft.
However, the truth is that neither the Soviet Union nor Russia was ever approached by India to share their technological know-how. India didn’t bother to research and learn the technology, whether it was the Bofors or the MiG aircraft, guns, submarines, or frigates. The impromptu selection of tools and planes continued unabated. Early on, after gaining independence, that was likely all India could manage after 200 years of colonial rule.
The Russian military equipment used by India includes far too many missile systems, missile launchers, artillery systems, helicopters, aircraft, ships, submarines, battle tanks, and naval systems. The list, which includes the supply from 1999 to 2021, was released by the SIPRI Arms Transfer Database. However, after the USSR broke up and became Russia, the supply was significantly reduced due to the new government’s inability to provide and lower budgetary allocations from the Indian government. However, imports increased by 42% between 2011 and 2021 compared to the previous ten years. India will rank first among all nations importing 27.9% of the total Russian weapons between 2017 and 2021.
According to the SIPRI Trend Indicator Values (TIVs), Russia’s exports to India peaked in 2013 at $3,853 million, up from $597 million in 1992. Additionally, the imports decreased starting in 2014, when the NDA government under Prime Minister Narendra Modi took office. The amount was $1,182 million in 2019 and $969 million in 2020.
Whether intentionally or unintentionally, the Congress regime looked to Russia for its arms supply, while the BJP has started doing business with nations such as the US, France, and Israel, among others. Fascinatingly, France has seen a tenfold increase in India’s weapons imports.
However, Russia continues to be the largest supplier of arms to India. Even though Russia’s share of India’s arms imports dropped from 69 percent in 2012 to 2017 to 46 percent from 2017 to 2021, this is the case. At least 410 Russian fighters, including those from the Soviet era, are in use by the IAF. They combine platforms that were both imported and legally constructed.
Russian spare parts and components are required for all four MiG-21 and MiG-29 variants. In the past, domestic arms makers have rarely concentrated on exporting weapons. Even though it had no qualms about running up a sizable import bill, the Indian government was reluctant to promote the export of arms. However, since the defence industry was liberalised in 2001 and the private sector began participating in the production of defence goods, exports have grown significantly.
The government of Prime Minister Narendra Modi has put particular emphasis on the significance of indigenous arms production and exports. India’s defence exports and export authorisations have increased dramatically in recent years, despite starting from a low base, driven by several reforms to increase international arms sales.
Way to increase exports
Undoubtedly, India has started to make serious efforts to increase its weapons exports. The Modi administration, which took office in 2014, unquestionably gave this momentum. PM Modi has shown a keen interest in defence production and publicly increased expectations for the nation to become a significant arms producer and exporter. The government has also realised that arms exports, including those made in the form of gifts, could help increase the nation’s strategic reach. The decision by India to give one of its submarines to Myanmar was a clear indication of the geopolitical motivations behind arms exports. India’s response to China’s expanding incursions into a crucial Southeast Asian nation, which New Delhi considers essential for its Act East policy, was the Kilo-class submarine, which was inducted into Myanmar’s navy in October 2020.
In addition to the gift, the government has stated that it intends to boost exports through various initiatives and target-setting. The Modi cabinet approved the export version of the Akash surface-to-air missile for sale to friendly foreign nations in December 2020 as part of a major push for exports. (According to the government, the missile’s export version is “different” from the version used by the Indian armed forces.) More importantly, it established a high-level committee with the national security advisor, the ministers of defence and foreign affairs, and other officials to approve future sales of effective systems to various nations, including through government-to-government agreements.
The DRDO, the top R&D organisation in charge of creating cutting-edge defence technologies for the Indian armed forces, has listed more than 150 products for export due to the government’s encouragement to business. There are several expensive items on the list, which spans nine categories and includes fighter jets, airborne early warning and control systems (AEW&C), tanks and other armoured vehicles, towed-artillery gun systems, multi-barrel rocket launch systems, surface-to-surface, surface-to-air, anti-tank, and cruise missiles, among other things.
The government has set a goal for the Defence Public Sector Undertakings (DPSUs), the backbone of India’s defence industry, to achieve 25 percent of their respective annual turnover from exports by 2022–2023. The goal may seem ambitious, given that exports currently account for about 4% to 5% of their total revenue. Still, it may serve as a catalyst for public-sector businesses to step outside of their typical comfort zone of carrying out orders from the Indian government that are guaranteed to be delivered to the Indian armed forces.
DPSUs have started factoring exports into their business plans to achieve this goal and are actively looking for global markets. A $21 million export agreement for the supply of Counter Measure Dispensing Systems was signed in November 2021 between missile manufacture Bharat Dynamics Ltd (BDL) and Airbus Defence and Space as proof that some have already shown early, albeit limited, success (CMDS).
To export its indigenous Light Combat Aircraft, Hindustan Aeronautics Ltd (HAL), India’s largest defence company by value, is researching markets in Malaysia, Argentina, and Egypt (LCA). In Malaysia, LCA is one of the three bidders chosen from five competing offers (along with the Pakistani-Chinese JF-17 and the South Korean FA-50) for the $900 million deal to supply 18 fighters (with an option of 18 more).
The MoD has implemented several policy changes in recent years to support the government’s push for defence exports, starting with the announcement of a Strategy for Defence Exports (SDE) in September 2014. The five-page document represented the first ever attempt to institutionalise the export of arms through the establishment of various decision-making frameworks and export facilitation programmes. After the SDE, the MoD then published a Standard Operating Procedure (SOP) to formalise the licensing and other requirements that Indian companies must follow in order to obtain export authorisation. The aforementioned SOP has undergone additional simplification to become more business-friendly by streamlining some demanding end-user requirements and intergovernmental consultation procedures.
The SDE has been supplemented with a number of additional initiatives, such as the development of an end-to-end online portal for processing export authorisations, the establishment of a cell within the MoD to coordinate and monitor export inquiries from potential importers, notification of Open General Export Licence (OGEL) to facilitate exports of notified items to pre-approved destinations without seeking prior approval, and a programme for potential exporters to use government testimonies.
Challenges at the doorstep
India has made a modest start in its recent defence export endeavours, but it won’t be simple to maintain it in the long run. Exporting low-value, low-tech goods and parts is one thing; exporting high-value, lethal equipment is quite another. India exports primarily to nations with low purchasing power and strong political ties. In addition, most of the important items—aside from a few orders—are acquired through non-competitive agreements.
Competition from established players like the US, Russia, France, the UK, and Israel and emerging players like Turkey and South Korea will be India’s most significant obstacle in achieving its ambitious goal. In such a situation, India’s best chance of achieving its short-term goal of defence exports is to promote some of its best-selling products (like LCA, Akash, and BrahMos) to nations that have expressed interest. To achieve early successes and, more importantly, develop a brand image that will support exports in the future, the Indian government and arms exporters would need to pursue these countries.
Nevertheless, the state-owned DPSUs would bear a large portion of the burden for developing a brand image in short- to medium-term. These organisations produce nearly all the expensive weapon systems for the Indian armed forces, making them at least the most prominent players in the country’s defence industry. Without the export of such significant systems, India is unlikely to meet its export targets and strive to become a player of any real significance in the world arms market. However, if the past is any guide, such demands of the DPSUs are unrealistic.
Historically, public-sector organisations have refrained from entering international markets, supported by directives from the Indian government. It hasn’t done much to improve India’s reputation whenever some have entered the global market. When Ecuador grounded Dhruv helicopters following a few crashes, even though pilot error and poor maintenance were to blame, it severely damaged HAL’s reputation as India’s leading aircraft manufacturer. To establish a trustworthy reputation in the fiercely competitive global arms market, Indian exporters must view training and post-delivery maintenance as an essential component of export contracts.
India’s political, diplomatic, and bureaucratic inertia pose a significant obstacle to realising its defence exports. Even though the 2014 Strategy of Defence Exports mentions government assistance for business in its export endeavours, little has been observed on the ground in time-sensitive situations. For instance, Garden Reach Shipbuilders and Engineers Ltd’s (GRSE) effort to win a $319 million export order to supply two light frigates to the Philippines left much to be desired regarding the Indian government’s involvement. The state-owned company was the lowest bidder and technically compliant, but it lost because it lacked the funds to carry out the contract.
The changes to the offset guidelines could challenge maintaining defence exports in the medium term. The MoD runs the risk of losing export opportunities by lowering the multiplier on the export of parts and components, particularly from the private sector, which has been the leading supporter of India’s defence exports over the past five years.
Miles to go
Given the nation’s historical aversion to arms export and the inward-looking mindset of state-owned entities, India’s recent success in the defence export market is impressive. However, India would need to switch from its current strategy of mainly exporting parts, components, and sub-systems to powerful platforms and weapon systems if it were to maintain exports to meet an ambitious $5 billion export sales goal. India can only achieve its export goals by exporting large systems like aircraft, missile systems, and the like. Even though India faces many obstacles on its path to becoming a significant arms exporter, one thing is sure: the nation possesses the necessary capacity and a range of domestic goods that could be used to achieve its export objectives.
-The writer is an Independent Journalist covering Defence and Aerospace. He can be reached out at vaibhavmag1@gmail.com
