India’s Defence Exports: Current Status, Challenges, Government Support and Policy

Context:

This editorial is based on the news “Defence exports: A strategic imperative” which was published in the Business Standard. With escalating geopolitical tensions driving the expansion of the defence and aerospace industry, India has a significant opportunity to become a key player in the global defence exports market.

India’s Defence Exports: Current Status 

• Expanding Global Defence Industry: From $750 billion in 2022, to $1.38 trillion by 2030.
  • Leading Arms Exporters: The US, Russia, France, China and Germany, as per SIPRI report. 
• Surge in India’s Defence Exports: From Rs. 686 Crore in FY 2013-14 to nearly Rs. 16,000 Crore in FY 2022-23. This propelled India into the top 25 defence exporters globally.
• Private Sector Dominance: Nearly 80% of the export growth is attributable to private industry.
• Items of Export: Encompass missiles, rockets, torpedoes, artillery-guns and drones, etc.
• Major Export Destination: India’s private companies and Defence PSUs currently export defence equipment to over 75 countries such as Italy, Maldives, Sri Lanka, Russia, etc.

How India Will Be Benefited From Its Defence Exports?

• Economic: Earns foreign currencies and substitutes the import of defence products.
• Integration with Global Defense Supply Chain: With countries like the USA, France etc.
• Strategic Interdependence: To create dependencies for maintenance, repair and future upgrades, linking India technologically with partner nations.
• Enhanced Military Cooperation: Selling defence equipment fosters compatibility, facilitating joint operations, interoperability and broadening military collaboration opportunities.
• Geopolitical Influence and Diplomatic Leverage: Defence ties influence the geopolitical stance of partner countries, enhancing India’s strategic position and diplomatic relations.
• Self-Reliance: Focusing on indigenisation strengthens India’s defence sector, mitigating vulnerabilities associated with foreign imports and bolstering its role as a key Indo-Pacific power.

Factors Contributing To India’s Defence Export Growth

• Geopolitical Uncertainties: Dependence on foreign suppliers exposes vulnerabilities. 
• External Opportunities: Decline in Chinese arms exports opens opportunities for India.
• Domestic Strengths and Initiatives: India’s capability to service Russian military platforms.
  • The Indo-Pacific region’s growing strategic importance enhances the role of Indian shipyards in servicing US and European naval forces.
  • India’s prowess in software and AI in defence fulfils the requirement of the modern warfare shift towards tech-driven capabilities, attracting global defence OEMs.

• Government Support and Policy To India’s Defence Exports

  • Innovation for Defence Excellence (IDEX) has fostered hundreds of startups.
  • Defence Production & Export Promotion Policy (DPEPP) envisages an environment that encourages R&D and promotes self-reliant defence industry.
  • Positive Indigenization List of Government comprising 411 major weapon platforms and systems with an embargo on their import from defined timelines.
  • The Defense Exports Steering Committee is playing a significant role in coordinating and promoting the export of defence products from India.
• Infrastructure and Innovation: Grant of Line of Credit by India to other countries, Private Sector and Startup Engagement, Export Facilitation Measures and Financial and Promotional Support.

Challenges To India’s Defence Export Growth

• Bureaucratic resistance and outdated practices, block private sector integration into defence manufacturing and deter innovation.
• Delays in crucial defence projects and cost overruns due to such delays hamper the growth. As per the Ministry of Defence, 23 of 55 DRDO’s ‘mission mode’ projects have been delayed.
• Insufficient funding for R&D and lack of attractive investment. India’s Gross Expenditure on Research and Development (GERD) is only 0.65%.
• Infrastructural Deficit increases India’s logistics costs, thus reducing the cost competitiveness and efficiency in the defence sector. 

Way Forward To India’s Defence Export Growth

• Simplify Rules for Government-to-Government sales to ease procurement.
• Framework for International Sales to facilitate easier international transactions.
• Allowing Defense Lines of Credit in proposals  and Interest rates need to be reduced.
• Innovation and Technology Licensing to protect national interests and support startups.
• Integrating the Defense and Education Sector to boost defence innovation.
• Establishment of a Think Tank with national and international experts.