INDIA’S DEFENCE EXPORTS
2022 MAR 4
Science and Technology > Defence technology > Basics of defence technology
- In a big boost to India’s defence exports, BrahMos Aerospace has inked a USD 375 million deal with the Philippines to provide the shore based anti-ship variant of BrahMos cruise missile to the country’s navy.
INDIA’S DEFENCE EXPORTS’ STATUS:
- The Government has set an ambitious target to achieve exports of about Rs. 35,000 crore (USD 5 billion) in aerospace and defence goods and services by 2025.
- As per Government data, defence exports for 2020-21 stood at Rs.8434.84 crore and the export target for financial year 2021-22 was Rs.10,000 crore.
- The Stockholm International Peace Research Institute (SIPRI) ranked India at number 23 in the list of major arms exporters for 2015-2019. India accounts for 0.17 per cent of global arms exports.
- India has put out a range of military hardware on sale which includes various missile systems, Light Combat Aircraft (LCA), helicopters, warship and patrol vessels, artillery guns, tanks, radars, military vehicles, electronic warfare systems in addition to other weapons systems.
BRAHMOS SUPERSONIC MISSILES:
- BrahMos is a two-stage medium range ramjet supersonic cruise missile. It uses a solid propellant engine in the first stage and a liquid ramjet in second.
- It is a joint venture between India’s Defence Research and Development Organisation (DRDO) and Russia's NPO Mashinostroyeniya. The missile derives its name from the Brahmaputra and Moskva rivers.
- The missile is capable of being launched from land, sea, submarine and air against surface and sea-based targets.
- The range of the BrahMos was originally limited to 290 kms as per obligations of the Missile Technology Control Regime (MTCR) of which Russia was a signatory. Following India’s entry into the club in 2016, plans were announced to extend the range initially to 450 kms and subsequently to 600 kms.
- BrahMos with extended range upto 450 kms has been tested several times since.
- The missile has been long inducted by the Indian armed forces and the Army recently deployed BrahMos along the Line of Actual Control (LAC) in Arunachal Pradesh.
MISSILE TECHNOLOGY CONTROL REGIME (MTCR):
- The Missile Technology Control Regime (MTCR) is an informal political understanding among states that seek to limit the proliferation of missiles and missile technology.
- The regime was formed in 1987 by the G-7 industrialized countries. Currently, it has 35 members, India being one of them.
- While there is no formal linkage with the United Nations, the activities of the MTCR are consistent with the UN’s non-proliferation and export control efforts.
INDIA’S OPPORTUNITIES IN DEFENCE EXPORT:
- Frugal engineering, high-quality engineering talent and strong IT infrastructure provides India an opportunity to progress in the area of defence manufacturing and exports.
- Growing indigenous manufacturing capabilities:
- According to SIPRI, three Indian companies - Hindustan Aeronautics Limited (HAL), Ordnance Factory Board and Bharat Electronics Ltd (BEL) - figure among the top 100 defence companies in the 2020 rankings and their arms sales have been growing in recent years.
- Policy support by government:
- The Atmanirbhar Bharat Abhiyan has underscored the need for self-reliance to meet India’s security needs and defence exports is a pillar in the drive to attain self-sufficiency in defence production.
- Rising demand in Indian Ocean Region:
- Chinese aggressions in Indian Ocean region have increased the demand for arms among South East Asian countries.
- Eg: Philippines, currently locked in a territorial dispute over the South China Sea with China, needs the Brahmos missiles to deter intruding Chinese ships.
- Cordial relations with major players:
- India maintains good relations with major arms traders like USA, France and Russia. This has enabled India to strike deals which involves technology transfer and capacity building in defence equipment manufacturing.
- Eg: India-Russia AK-203 rifles deal, where 20,000 rifles will be imported from Russia, and more than six lakh rifles will be manufactured in India by a special purpose Joint Venture called Indo-Russian Rifles Private Ltd (IRRPL).
SIGNIFICANCE OF DEFENCE EXPORTS:
- Make India a manufacturing hub:
- Defence exports adds impetus to the efforts to meet the ambitious target set by the Government to achieve a manufacturing turnover of USD 25 billion or Rs.1,75,000 crore by 2025.
- Defence indigenization:
- As per SIPRI, between 2016-20, India is the second largest arms importer after Saudi Arabia. Defence exports will lead to the development of strong indigenous manufacturing capabilities, especially in the MSME sector, and can help reduce India’s reliance on import.
- Enhance bilateral relations:
- As the deal is finally through with the Philippines, other countries like Malaysia, Thailand, Vietnam and Indonesia, who have shown interest in acquiring the anti-ship missile, could also come onboard. This can help strengthen India’s bilateral ties with South East Asia.
- Enhance domestic R&D:
- The domestic defence industry would have limited scope for investment in R&D if it relies only on the domestic demand. The strong competition in defence exports can help bring investment and innovation into defence manufacturing.
- Geopolitical significance:
- India is increasingly reaching out to countries in the Indian Ocean Region (IOR) and ASEAN that mostly depend on China for defence procurements, and is positioning itself as a more “reliable security partner” and as an “alternative to China”.
- Atmanirbhar in defence:
- To provide faster approvals for export of major defence platforms, a committee comprising of the Defence Minister, External Affairs Minister and National Security Advisor was set up.
- FDI in defence manufacturing
- Foreign Direct Investment (FDI) in the defence sector is allowed up to 74% through the automatic route and up to 100% by government route.
- Positive Indigenisation List:
- A Positive Indigenisation List is a list of defence materials that India will not import. This would offer a great opportunity to the Indian defence industry to manufacture these items to meet the forces’ requirements.
- Corporatisation of Ordnance Factory Board:
- Ordnance Factory Board (OFB) has been split into seven different PSUs.
- Defence Acquisition Procedure 2020:
- Boost for R&D:
- As per the 2022 budget, 25 percent of the annual research and development budget of the defence ministry will be reserved for private companies and start-ups.
- Export promotion cell:
- Export Promotion cell under Department of Defence Production, MoD has been formed to co-ordinate and follow-up on export related action including enquiries received from various countries and facilitate private sector and public sector companies for export promotion.
- Diplomatic efforts:
- Ministry of External Affairs is facilitating Lines of Credit (LOC) for countries to import defence product. In addition, defence attaches in Indian missions abroad have been empowered to promote defence exports.
- Efforts to enhance ease of doing business:
- Simplified defence industrial licensing, relaxation of export controls and grant of no-objection certificates and specific incentives under the foreign trade policy.
- Standard Operating Procedure (SOP) for the export of munitions list items.
- Rescinded a section of the Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) list that will allow easier exports.
- An online portal for receiving and processing export authorization permission
- Delegated powers to defence public sector units to explore opportunities for export and participation in global tenders.
- The draft ‘Defence Production & Export Promotion Policy (DPEPP) 2020’ is expected to be finalised soon.
- Defence Industrial Corridors:
- Innovations for Defence Excellence (iDEX):
- Defence Innovation Hubs (DIHs):
- iDEX framework under the Defence Ministry is envisaging setting up of independent Defence Innovation Hubs (DIHs) where innovators can get information about needs and feedback from the Armed Services directly and create solutions for India’s major defence problems.
- DIO has announced setting up of two DIHs in Coimbatore and Nashik
- Defence India Startup Challenge:
- Launched by Ministry of Defence in partnership with Atal Innovation Mission, it aims to support Startups/MSMEs/Innovators to create prototypes and to commercialize products or solutions in the area of National Defence and Security.
CHALLENGES IN DEFENCE EXPORTS:
- No unified efforts:
- India’s MoD so far has no dedicated agency to drive exports. Exports are left to individual corporations, like BrahMos, public shipyards and private entities.
- Stiff competition:
- The US, Russia, France, Germany, China and Israel are established players in the international arms market. India needs to develop cutting edge products and competitive prices if it is to compete as a major exporter.
- Weak economy:
- In order to achieve the target of USD 5 billion, defence exports have to grow at over 40 per cent until 2024. This would be a challenge in the post-pandemic economy.
- While India may be ready to export defence items to other countries, it may not be possible for the intended buyers to make the purchases as they look to bounce back from the economic hit of the Covid-19 pandemic.
- Limited R&D capabilities:
- Compared to the US and China which spend in excess of 10 per cent of their defence budget on R&D, India spends around 5-6 percent.
- Also, the lack of incentives has resulted in low priority being given to R&D. For instance, the R&D spending in OFB was as low as 0.7-0.8% of their turnover.
- Import dependency:
- Technology transfer has been India’s major policy mosaic to build major systems and platforms. Hence, manufacturing continues to be based on foreign design, rather than indigenous design.
- Chances of corruption:
- Defence deals in India have always been controversial, with allegations of corruption and crony capitalism. This arises because of the lack of an organizational structure with well-defined procedures and robust overview mechanisms.
- Ethical issue:
- Defence export is a business model the feeds on armed conflict, violence and instability. Also, there are several countries in Asia and the Middle East having issues related to human rights. The weapons could also end up in the wrong arms, like terrorist outfits. Hence, the export of arms by India could be considered as against the principle of non-violence and peaceful coexistence.
- A dedicated agency:
- An agency dedicated for promoting defence exports could be established. Its aim should be to identify global export opportunities and link them with Indian domestic manufacturers. It should consist of scientists, bureaucrats and defence industry players.
- Encourage private players:
- Private players are crucial in the development of defence manufacturing and export. To further encourage them, efforts like Product Linked Incentives could be looked into.
- Government support for industries:
- In order to increase exports, the MSME manufacturers would need handholding from the government. The larger industries need assistance in identification of global opportunities and bureaucratic support for facilitating easy exports.
- Investment in capacity building:
- For India to boost its defence export, it must invest in domestic capacity building, innovation, and joint collaborations. A separate intellectual property regime for defence related innovations can also be created.
CASE STUDY: ISRAEL’S SIBAT
- Israel has a much lower annual defence spend compared to India but is ranked 8th in terms of defence exports.
- A major reason for its emergence as a defence manufacturing and export hub has been the establishment of SIBAT, a dedicated directorate under the Israeli Ministry of Defence (IMoD).
- SIBAT looks after promotion of defence exports and participates in the formulation of Israel’s defence export policy. SIBAT acts as a one stop shop for all the Israeli defence manufacturing firms and the directorate continuously tracks export opportunities within the sector.
- It has updated information regarding the wide variety of technologies and solutions being developed by Israeli defence companies.
- The directorate also works through diplomatic and government-to-government (G2G) channels to promote Israeli defence exports.
Q. Examine India’s prospects and challenges in emerging as a major defence exporter?