“If a country has to be dependent on imports for its defence, can it think of becoming a world leader?” Likely, India couldn’t think of becoming a world leader with aspects of its defence system, until recently. The country has now begun a comprehensive military modernization program that includes the purchase of new rifles, combat aircraft, ammunition, carbines and artillery, rotary-wing aircraft and force multipliers such as; electronic warfare suites, network-centric warfare and air defence systems among others.
India took an adverse hit during World War II. To make up for it, and to be ready, 12 ordnance factories were developed during the British rule but there was no self-reliance or technological advancements. But that did not demotivate India. Our defence system has been undergoing dynamic changes ever since the 1950s. But there wasn’t a drastic change seen until the BRAHMOS joint venture between Russia and India which occurred after the liberalization policy that took place in 1998, which also helped the private sector pave its path in the defence system, leaving behind state-run enterprises and a centrally planned economy that India was.
Lately, defence manufacturing has received huge amounts of funding from the Indian economy to become self-sufficient. In 2020-21, 2.1% of the total GDP was allocated for defence. In 2021-22, the total government expenditure on defence systems was 13.5%, which was the highest spending amongst all other sectors. Such figures have only been possible since the amendments made to the Defence Procurement Policy. DPP’13 gave a boost to domestic procurement and then, indigenous defence equipment was announced as the preferred choice. In this policy, Inter-continental ballistic missiles were developed along with aircraft carriers and nuclear submarines, but foreign technology was still used. DPP’16 included the following; increased procurement efficiency, ease of doing business, entry barriers were worked out in favour of the private sector and huge incentives were provided to it, more transparency was enabled, licensing process was eased down, FDI was increased from 26% to 49% and lastly, BUY Indian-IDDM (Indigenously Designed, Developed & Manufactured) procurement category was introduced. Later ahead in 2020, this policy was remade into Defence Acquisition Policy. Under this policy, the total capital acquisition was 60% and indigenous software, start-ups and MSMEs were given a push for good. Atma-Nirbhar Bharat’s ideation was in a nutshell brought into a more focused light through the defence system. This enabled self-sufficiency & employment opportunities for the import burden to be reduced as India alone imported 10% of the world’s arms and ammunition in 2015-19, higher than any other country. In February 2021, the Indian defence system ordered M4 Armoured Vehicles from a Pune-based company, Bharat Forge. The Department of Military Affairs banned the import of 209 items to encourage the ‘Make in India’ objective. The Defence Research and Development Organization (DRDO) along with 7 companies formed out of 41 ordnance factories form the industrial base for the defence sector. 12 defence PSUs are currently contributing to the defence system.
As of date, the private sector has been dominant over public companies when it comes to the defence manufacturing industry of India. Battlefield Management Systems included TATA and L&T to design the UAV (Unmanned Air Vehicle) Lakshya for DRDO. Significant Provisions Strategic Partnership Policy has also been introduced which is meant to progressively build capabilities in the Indian private sector to design, develop and manufacture complex weapons for the future needs of the armed forces. Selected private-sector Indian companies have been permitted for joint ventures with foreign firms to establish manufacturing units of fighter jets, helicopters, armoured vehicles and submarines. SRIJAN portal has also been introduced, which gives information on items that can be taken up for indigenization by the private sector.
Today, there are 300 private companies registered and defence production has been started in 110 of them. Whereas the government of India aims to achieve a turnover of US $ 25 billion including export of US $ 5 billion in aerospace & defence goods and services by 2025. The same is expected to touch the US $ 40 billion mark by 2031. In the next 5-7 years, India aims to spend US $ 130 billion for fleet modernization across all armed forces. As per the union budget 2023, the share of domestic capital procurement has been enhanced from 64% in FY22 to 68% in FY23. In the past 4 financial years, 141 contracts have been signed with Indian vendors against 96 contacts signed with foreign vendors for procurement of defence equipment for armed forces. A Positive Indigenous List has also been announced which enlists the items that are to be produced only in India. Kalyani Rafael Advanced System, a joint venture of the Kalyani Group and the Israeli defence technology company has been given the licence to start the production of defence weapons in India, along with the known TATA, Reliance, Mahindra, Adani, L&T and more.
Indian defence exports have grown from US $ 1.9 billion in 2016 to US $ 1.5 billion in 2022 at a CAGR of 6%. India has already exported equipment worth approximately US $ 1.5 billion. Relaxation of export limitations and policy changes, Indian defence exports are expected to rise rapidly. The target countries are South Africa, Thailand, Azerbaijan, Singapore, Sweden, Seychelles, Guinea, Lebanon, Qatar, Iraq, Uruguay, Ecuador, Japan, Egypt, The US, Finland, Australia, France, Germany, the Netherlands and Israel.
It has been a long path for India to be self-sufficient, and a longer one is ahead. In order to reach where it wants to, India will have to make some suggestive changes. More investments can be infused into the defence modernization and growth sector. The budgetary issue; salaries and pensions have a 54% allocation whereas defence modernization has only 27% and definitely should be increased. Bureaucratic red-tapism needs to be streamlined too. Private sector involvement can be uplifted by giving it larger projects and machinery maintenance & repair contracts.
The government of India is focusing on innovative ways to strengthen the country’s defence and securities through ‘Innovations for Defense Excellence (iDEX)’ which has provided a platform for start-ups to join defence institutions and develop new technologies/products in the coming five years. In an effort to strengthen the defence sector and increase FDI inflows, the government in 2020 allowed FDI through the automatic route up to 74% and 100% through the government route in any area likely to provide access to contemporary technology. The Ministry of Defense has set a target of 70% self-sufficiency in armaments by 2027, creating huge prospects for industry players. With the government’s emphasis on easing foreign investment restrictions to achieve India’s ‘Atma-Nirbhar Bharat’ goal, the growth trajectory of India’s defence sector remains strong.
Here’s how the Indian Defence System’s Atma-Nirbharta journey has been so far:
