India’s Import Ban List is a Good Start to Tap into Foreign Markets, with a target of Rs 35,000 crore in export: Defence Diary

The recent buzz around India’s military exports, which grew louder after India announced a $375 million BrahMos Supersonic Cruise Missile agreement with the Philippines, prompted me to look at the extensive public data on the subject.

With a cursory glance, some astounding numbers emerged, shedding insight on India’s efforts to expand its export markets for weapons and subsystems.

In the last five years, defence exports have increased nearly sixfold, from Rs 1,500 crore to Rs 9,000 crore.

According to the defence ministry, India exports Personal Protective Equipment, Offshore Patrol Vessels, ALH Helicopters, SU Avionics, Bharati Radio, Coastal Surveillance Systems, Kavach MoD II Launcher and FCS, as well as Spares for Radar, Electronic System, and Light Engineering Mechanical Parts.

Italy, the Maldives, Sri Lanka, Russia, France, Nepal, Mauritius, Sri Lanka, Israel, Egypt, the United Arab Emirates, Bhutan, Ethiopia, Saudi Arabia, the Philippines, Poland, Spain, and Chile are among the biggest export destinations.

According to a survey by the Stockholm International Peace Research Institute (SIPRI), India ranks 23rd among the top 25 major arms exporters, with a 0.2 percent share in global arms exports between 2017 and 2021, up from 0.1 percent in the previous years.

Myanmar received 50% of India’s defence exports between 2017 and 2021, followed by Sri Lanka with 25% and Armenia with 11%.

Aside from the high-profile BrahMos contract, Hindustan Aeronautics Limited (HAL) has agreed to deliver the advanced version of the Advanced Light Helicopter (ALH Mark III) to Mauritius, which has been operating the ALH and Do-228 aircraft.

In order to export its indigenous Light Combat Aircraft Tejas, India has been pursuing Malaysia and other countries.

However, a thorough examination of the data revealed some negative issues.

India’s private sector accounts for over 90% of the country’s entire defence exports, despite the fact that it is just a decade old. About 50 private-sector Indian companies have contributed to this.

For the financial year 2020-21, the value of exports by defence public sector undertakings (DPSUs) such as Mazagon Dock Shipbuilders Limited (MDL), Goa Shipyard Limited (GSL), and Hindustan Shipyard Limited (HSL) was ‘nil.’

Even other DPSUs like BEL, HAL, BEML, GRSE, BDL, and MIDHANI had meagre exports in 2020-21, with Rs 376.46 crore, Rs 194 crore, Rs 463 crore (including deemed exports), Rs 87.49 crore, Rs 145 crore, and Rs 19.42 crore, respectively.

This information confirms a long-standing issue with DPSUs. Even while all of them have made profits in the last five years, their poor rate of production even for their biggest customer — the Indian Armed Forces — is concerning.

In a recent analysis, SIPRI, which had ranked India among the top 25 arms exporters, also stated that, despite reduced purchases, India remains among the top buyers.

According to SIPRI, India was the third highest military spender in 2021, with $76.6 billion, trailing only the United States and China.

So, how will India, which has been working hard to reduce imports, fulfil its target of Rs 35,000 crore in defence exports by 2025?

POSITIVE INDIGENISATION LISTS: A GOOD STARTING POINT

The three positive indigenization lists released by the defence ministry may be a good place to start as India prepares for an exponential increase in defence exports over the next three years.

In the previous two years, India has released three lists including a total of 310 pieces of equipment and military systems that will be subject to a phased import ban with deadlines.

Lightweight tanks, naval utility helicopters, missiles, mounted artillery gun systems, medium altitude long endurance unmanned aerial vehicles, and loitering munitions are among the latest high-tech platforms on the list.

While the lists were primarily intended to halt defence imports, they were carefully crafted to take into account the manufacturing capabilities of India’s private industry and state sector in the defence sector.

Select equipment and military systems from these three lists might be narrowed down for export, with an emphasis on improving quality to build demand in foreign markets while ramping up production to meet export orders.

With the private sector accounting for the majority of India’s defence exports, the DPSUs must be held more accountable in terms of quality and production speed—from research and development through design and development—in order to satisfy rigorous timeframes in order to enhance exports.

However, this is only reasonable to assume when the DPSUs have been adequately modernised. Enhancing the existing trial and testing infrastructure for defence systems is also vital.

As a legislative panel stated in a recent study, DPSUs should ensure and follow the development of state-of-the-art equipment and platforms, in addition to timely completion and delivery, outstanding quality of the goods, platforms, and equipment.

POLICY INTERVENTIONS

The government has made a number of legislative changes in recent years to encourage defence exports, with the goal of not only bringing in income but also strengthening diplomatic ties with other friendly foreign countries.

Creation of a new cell to coordinate export-related activities, such as receiving inquiries from various countries and sharing leads with private and public sector companies, notification of a scheme to provide financial support to India’s defence attachés in order to promote exports, and extending the validity of an export authorization are just a few examples.

There’s also a strategy to promote defence exports, which includes giving firms access to the defence ministry’s testing infrastructure for product certification.

Apart from bolstering these mechanisms, there is currently no formal policy in place to promote defence diplomacy through exports.

India might also consider developing a pathway for the sale of platforms or weapon systems that have been de-inducted by the Indian military, or that could be delivered to a country on short notice to meet an urgent need.

Several international markets may be in need of it, and India should make a concerted effort to tap into them.