Date : 10/11/2023

Relevance: GS Paper3- Security- Indigenisation of Defence Technology

Keywords: Defence Production and Export Promotion Strategy (DPEP) (2020), Indigenisation Lists, Critical Technology

Context-

India, often dubbed as the world's largest arms importer, has been making noteworthy strides in its defence export trajectory in recent years. Despite being a prominent player in global arms imports, India's shift towards prioritizing domestic defence manufacturing and adopting a more liberal export regulatory framework has propelled its defence export value to INR 15,920 crores (approximately US$5 billion) in 2023—a tenfold increase from INR 1,521 crores in 2016-2017.

Setting the Stage: Historical Perspective on Defence Exports

• In 2013-14, India's defence exports stood at a modest INR 686 crores, underlining the significant leap achieved in the subsequent years. This transformation can be attributed to a series of strategic measures aimed at reducing dependence on imports and fostering a robust domestic defence manufacturing base.

Driving Forces Behind the Surge

• Defence Production and Export Promotion Strategy (DPEP) (2020): The cornerstone of India's defence export surge has been the DPEP, providing a comprehensive framework to enhance domestic defence manufacturing and setting clear export targets. The government's ambitious goal of achieving US$5 billion in defence export revenue by 2025 reflects a commitment to sustainable growth.
• Indigenisation Lists and Procurement Policies: Multiple positive indigenisation lists have been introduced, compelling the procurement of specific military equipment from indigenous manufacturers. This move not only boosts opportunities for domestic manufacturers but also strengthens India's self-reliance in defence production. Additionally, the reservation of 75 percent of the defence capital procurement budget for domestic industry further catalyzes the growth of the indigenous defence sector.
• Liberalised Licensing and Certification Norms: To eliminate bureaucratic impediments, the government has introduced liberalised licensing and certification norms, streamlining the process of defence exports. This proactive approach ensures a smoother pathway for manufacturers, fostering a conducive environment for export growth.
• Whole-of-Government Approach: The Ministry of External Affairs has joined the fray, actively promoting the sale of Indian defence equipment abroad through embassies. Furthermore, lines of credit to African countries have been initiated, strategically boosting defence exports and expanding India's global footprint in the defence industry.
• Establishing defence Industrial Corridor: The Indian government has established two defence industrial corridors, one in Uttar Pradesh and the other in Tamil Nadu. The corridors aim to create an ecosystem for defence manufacturing and promote exports. The corridors provide infrastructure, facilities, and incentives to defence manufacturing companies.
• Established Defence Innovation Organisation: Established in 2018, the Defence Innovation Organization (DIO) strives to boost innovation in the defense sector. It supports startups and innovators through funding, mentoring, and other assistance while promoting collaboration between the private sector, academia, and the defense industry.

Charting the Trajectory: Analyzing Defence Export Data

• The upward trajectory of India's defence exports is evident in the following figures:



• Despite minor fluctuations, the overall trend showcases a commendable surge in defence export revenue, with the peak reached in 2023.
• Despite this success, there's a pressing need to elevate the value of defense exports and target larger markets to meet the USD 5 billion export goal by 2025.
• India has faced challenges in converting expressed interest into business action, particularly with countries like Indonesia, Malaysia, Singapore, Vietnam, Egypt, South Africa, and Brazil, particularly concerning products such as the BrahMos and Akash missile systems.
• Even though there is interest from countries like Indonesia, Malaysia, Singapore, Vietnam, Egypt, South Africa, and Brazil in the BrahMos missile system, India has struggled to translate this interest into tangible business actions.
• Additionally, securing substantial naval defense orders from nations like Oman, Myanmar, Mauritius, and Vietnam has proven elusive for India. Addressing these challenges will be crucial to meeting the ambitious export targets set for the coming years.

Major exports:

1. BrahMos cruise missiles exported to the Philippines, and is likely to be exported to Vietnam, and Indonesia.
2. Dhruv helicopter, developed by HAL, was exported to Nepal, Maldives, Ecuador, and Peru.
3. The Akash missile system, by DRDO, is likely to be exported to Vietnam and Oman.
4. Sonar systems exported to Vietnam and Myanmar
5. Bulletproof jackets exported to Nepal, UAE, and Malaysia for military and law enforcement.
6. T-90 tanks were exported to Algeria and Turkmenistan.
7. Other exports include Weapon Simulators, Tear Gas Launchers, Torpedo Loading Mechanisms, Alarm Monitoring and control, Night Vision Monoculars & Binocular, Light Weight Torpedo and fire Control Systems, Armoured Protection Vehicles, Weapons Locating Radar, HF Radio, Coastal Surveillance Radar, etc.

Role of Private Players:

1. Private companies in India invest in R&D for cutting-edge defense technologies, like Tata Advanced Systems in Hyderabad.
2. Collaboration with international partners, e.g., Bharat Forge with AM General for Humvees, and Mahindra Defence Systems with Saab for fighter jets.
3. Actively exporting defense products, such as Bharat Forge exporting artillery systems to the United States.
4. Infrastructure investments for defense manufacturing and exports, like Reliance Infrastructure's facility in Nagpur for aerospace components.
5. Joint ventures with foreign companies, like Tata Lockheed Martin Aerostructures Limited, focusing on aerospace component manufacturing in India.

Global Perspective: India's Stance in Arms Imports and Exports

• While India remains a formidable force in arms imports, accounting for 11 percent of global imports between 2018-22 according to SIPRI data, the nation is yet to break into the top 20 global arms exporters list.
• The journey towards reducing import dependency is evident, with a marginal one percent decrease in India's share of global arms imports from 2013-17 to 2018-22. The challenge now lies in sustaining the positive momentum and advancing towards a leadership position in global defence exports.

Challenges on the Horizon: Mitigating Factors for Sustained Growth

• Enhancing Coordination: Achieving continued growth requires enhanced cohesion among the Ministry of Defence, the three armed services, private manufacturers, and Defence Public Sector Undertakings. Coordination in arms export processes and identification of domestic defence products with global market potential are imperative for sustained success
• Overcoming Institutional Adhocism: Historically, institutional and policy adhocism has hindered the execution of recommendations from committees and reports. While the current trend suggests increased execution, maintaining focus and momentum is crucial for long-term success.
• Challenges in Competitiveness: India's defense offerings frequently face perceptions of lower quality and higher costs in comparison to major defense exporters such as the US, Russia, and Israel.
• Constrained Export Portfolio: The scope of India's defense exports is confined to a select few countries and specific product categories, restricting its ability to fully explore the expansive global defense market.
• Bureaucratic Obstacles: The defense export process in India is entangled with various bureaucratic hurdles and red tape, creating complexities for exporters attempting to navigate through the system.
• Lack of Critical Technologies: Poor design capability in critical technologies, inadequate investment in R&D, and the inability to manufacture major subsystems and components hamper indigenous manufacturing.

Way Forward:

Dedicated Defence Infrastructure:

• Establish comprehensive export infrastructure for defense, encompassing training, hand-holding, and market intelligence systems.
• Prioritize training programs for officers in Public Sector Undertakings (PSUs) engaged in international business to enhance their skills and knowledge.
• Introduce a specialized Export Promotion Council for the Defense Sector, staffed with officers well-versed in international defense policies.
• Foster familiarity with international treaties/protocols and India's UN-mandated commitments through the Export Promotion Council (EPC) officials.

Trade Support:

• Provide dedicated "Trade Support" from regulatory agencies to streamline approvals for production and export compliances in the defense sector.
• Expose the Indian defense sector to fragmented business opportunities through trade fairs, Buyer-Seller Meets (BSM), reverse BSMs, and incubation with partner countries.
• Utilize Indian missions abroad for platform-based exports (Tejas/Brahmos/Sarang/Light Combat Helicopter), offering diplomatic support during negotiations.

R&D Infrastructure:

• Explore joint or co-development opportunities with other countries based on the industry's needs, facilitated by the Department of Defence Production.
• Encourage the Indian defense industry to share its R&D infrastructure with prospective friendly buyers, fostering joint/co-development arrangements for specific export orders.
• Illustrative Example: Collaborate on a fighter aircraft for Egypt or a Rocket Launcher System for Bangladesh under joint/co-development arrangements.

Conclusion

India's journey from a significant arms importer to a burgeoning defence exporter is marked by deliberate policy shifts, strategic frameworks, and a whole-of-government approach. The Defence Production and Export Promotion Strategy has laid a solid foundation, but the road to becoming a global defence export leader is still ahead.

As India continues to ideate and implement reforms, sustained efforts are required to surpass the US$5 billion export target by 2025 and secure a spot among the top 20 global defence exporters. The convergence of economic growth and national security hinges on India's ability to capitalize on its current momentum and navigate the complexities of the global defence market.

Source - ORF