Defence Exports: A Strategic Imperative

Source: This post has been created based on the article “Defence exports: A strategic imperative” published in “Business Standard” on 16^th February 2024.

UPSC Syllabus Topic: GS Paper 2 International Relations – Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

News: The article discusses India’s defence exports industry – its growth, reasons behind growth and positive future prospects. India Defence Exports: A Strategic Imperative

Background:

What are the benefits of defence exports?

1) Economic Gains due to Expanding Market: Experts predict a rapid expansion of the global defence and aerospace industry, from $750 billion in 2022, to $1.38 trillion by 2030.

2) Strategic advantages:

1. Dependencies: Defence equipment from a specific nation establishes technological dependencies, influencing maintenance, repair, spare parts, etc.
2. Military Interoperability: It also enhances military interoperability, expanding options for joint operations.

These significantly impact the diplomatic and strategic geopolitical stance of partner nations.

What is the status of India’s defence exports?

India’s defence exports surged to a record Rs. 16,000 crore in 2022-23, a huge 800% growth in 5 years and reaching 85 countries across continents. This propelled India into the top 25 defence exporters globally.

Nearly 80% of this growth is attributable to private industry.

India’s expanding defence exports encompass missiles, rockets, torpedoes, artillery-guns, and drones, among others.

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What has led to a surge in India’s defence exports?

1. Enabling participation of private sector and startups in defence industry ecosystem.
2. Streamlining export permissions via a web-enabled system, which has reduced delays.
3. Online system to share enquires and leads with defence industry.
4. Instituting open general export licence.
5. Including defence exports as a key area for evaluating performance of defence attaches posted in Indian embassies abroad.
6. Availability of defence lines of credit (LOC).
7. Repositioning DefExpo and Aero India as world-class exhibitions showcasing India’s defence innovation ecosystem.

What are the reasons behind positive future growth prospects?

1) Integration of MSMEs: Hundreds of Indian MSMEs will be integrated into global defence original equipment manufacturer (OEM) supply chains.

2) China’s declining arms exports: This is due to poor quality and unreliable performance of Chinese equipment. For instance, Nigeria returning Chengdu F-7 fighters.

3) Other Exporters Pre-Occupied: Russia-Ukraine conflict-related disruptions, Israel’s preoccupation with Hamas, and USA being tied up on multiple fronts has led to India emerging as a reliable partner for countries looking to diversify their sourcing.

4) India’s Expertise: For instance, India is skilled at servicing Russian platforms, thus making it attractive to countries possessing Russian inventory.

5) India’s Strenghts in the IT Space: The rising importance of software and AI in defence platforms aligns with India’s strengths.

6) Defence Startups: Government’s Innovation for Defence Excellence (IDEX) programme has created hundreds of startups, which are poised for global licensing of their technologies.

7) India’s Positive Perception: Transformation of the global perception of India as a rapidly reforming and growing innovation economy lends credibility to its defence industry.

What more needs to be done?

1. G2G Sales: Rules should be developed for government-to-government sales to make it easier for foreign governments to procure from Indian firms.
2. Defence LOCs: Allowing empanelled defence firms to include defence LOC as part of their proposals could be considered. Interest rates for defence LOC need to be reduced.
3. Licensing of Indian Technologies: Establishing a licensing template safeguarding national and startup interests is essential.

Question for practice:

What is the status of India’s defence exports? Why are they expected to grow further in the future?