Achieving India’s Objective Of Rs 35,000 Crore In Defence Exports By 2025

The Ministry of Defence (MoD) signed a $375 million contract with the Philippines in January to sell Brahmos medium-range supersonic cruise missiles, which were co-developed by India and Russia. It would have been reason for celebration in the bureaucracy, but the contract is already facing an uncertain future as a result of sanctions imposed on Russia by the US and its NATO partners in response to the latter’s invasion of Ukraine.

Other contracts are also being considered by the Ministry of Defense in order to promote defence exports. Two Dornier military aircraft were sold to Sri Lanka, and a Light Combat Aircraft (LCA) Tejas was sold to Malaysia in a transaction for roughly $900 million. Hindustan Aeronautics Limited, a government-owned company, produces both of these planes (HAL).

These achievements are positive, but they do not guarantee a continuous growth in the volume of defence exports to Rs 35,000 crore by 2025, as stipulated by the Ministry of Defense. Official statistics, on the other hand, paint a different narrative.

The value of public and private sector exports, as authorised by the Department of Defence Production (DDP), grew from Rs 1,940.64 crore in FY 2014-15 to Rs 8,4,34.84 crore in FY 2020-21. It peaked at Rs 10,745.77 crore in FY 2020-21 before plummeting three times throughout this time span, in FY 2016-17, FY 2019-20, and FY 2020-21.

Even if it was, the inconsistent export trajectory does not encourage confidence that defence exports would continue to rise sharply in the future.

As a result, not only does the MoD have its job cut out for it, but the Indian industry will also have to put in a lot of effort to meet the 2025 objective. Much will be determined by what the Indian defence industry has to offer prospective buyers, the volume of exports, and other complex factors that influence global arms trade, such as the unexpected turn of events following Russia’s misadventure, which will undoubtedly boost the US and European defence industries.

Weapon Simulators, Tear Gas Launchers, Torpedo Loading Mechanisms, Alarm Monitoring & Control Systems, Night Vision Monocular & Binoculars, Light Weight Torpedo & Fire Control Systems, Armoured Protection Vehicles, Weapons Locating Radars, HF Radios, and Coastal Radar Systems were among India’s major defence exports in the past.

Although this is an impressive list, the majority of defence exports are parts and components. Ajay Bhatt, Minister of State for Defence, announced this in response to an unstarred question in the Lok Sabha on August 4, 2021. The importance of the above-mentioned list of exported commodities is therefore diminished.

By exporting parts and components, or even relatively low-value goods like those stated above, India cannot become a significant defence exporter, but it does present a potential for the local sector to flourish by becoming linked with the global supply chain. It is critical to export big defence equipment in large quantities and provide effective maintenance services for the exported equipment if exports are to rise steadily. That’s where the problem begins.

There are few, if any, indigenously designed, developed, built, and tested large equipment and platforms available for export in India. As in the case of the LCA Tejas, which employs a GE engine, a major amount of Indian defence manufacturing is based on licenced production or import of some crucial parts and assemblies. This might detract from India’s ambitions to become a major supplier of significant military systems and platforms.

In the past, the Indian defence sector has also experienced reputational damage. In 2005, Nepal accused INSAS (Indian Small Arms Systems) guns, which were created by the Defence Research and Development Organisation in the 1990s and delivered to Nepal, for the deaths of 43 troops in skirmishes with Maoist insurgents.

The Nepalese army spokesman had claimed at the time, much to India’s humiliation, that the counter-insurgency operations would have been more effective if the country had superior weaponry. Ecuador cancelled the deal with HAL for seven locally made Dhruv Advanced Light Helicopters a decade later, in 2015, after four of them crashed in a short period of time.

In all occasions, India refuted the claim, but the harm to its reputation had already been done. Reservations expressed frequently by the Indian armed forces in recent years about indigenously designed equipment and platforms such as the Arjun Main Battle Tank, Tejas Light Combat Aircraft, and even the INSAS rifles – the Indian troops frequently complained about the rifles’ tendency to jam and their magazines cracking in freezing temperatures – did not help. It takes a long time to create a company’s reputation and goodwill, but it takes even longer to destroy it.

Even if these fears are unfounded, breaking into the monopoly of big defence exports would be difficult. According to a Stockholm International Peace Research Institute (SIPRI) analysis from March 2021, the top five nations accounted for 75.9% of global defence exports from 2016 to 20. It’s no surprise that the United States (37%) and Russia (20%) are at the top of the list of the top 25 exporters. India is ranked 24th on this list, with a meagre 0.2 percent share of the global defence market.

To achieve exponential growth in exports, India would have to either reduce the percentage of the top ten exporters, who account for 90.3 percent of total trade, or increase the share of the remaining 15 exporters, which ranges from 0.2 percent to 1.9 percent.

Defense trade grows in the zone of influence of the exporting country, according to empirical data. Nothing exemplifies this more than China’s ascension to fifth place on the exporter list, despite the fact that it is also the fifth largest importer of armaments. Between 2016 and 2020, Pakistan accounted for 38% of China’s exports, followed by Bangladesh with 17%.

Myanmar (52 percent), Sri Lanka (24 percent), and Mauritius were the top three recipients of India’s defence exports during the aforementioned period (13 percent ). These nations don’t have a long-term market. Their requirements, as well as their financial resources, are restricted. To grow its exports, India will require one or two key consumers, as do other major exporting countries. If we look at the list of the top armament recipients, India confronts a stiff battle on this front.

Egypt, China, and Pakistan are among the top ten weaponry buyers in the world, but India will not export to them, even if they are eager. Saudi Arabia, Australia, Algeria, South Korea, Qatar, and the United Arab Emirates are also on the list, although these nations are unlikely to ditch western suppliers in favour of Indian providers.

The hype about ‘Make in India,’ as well as the inclination to congratulate oneself on the back for disconnected policy attempts to raise exports without an honest and objective assessment of their outcomes, has obliterated discussion of the ground realities and genuine hurdles in increasing exports.

What is required is a sensible defence export plan that takes into account the limitations provided by India’s restricted spectrum of indigenously designed and built equipment, as well as the geopolitics of fierce global competition in the weapons export market.