The SIPRI report of 2021 listed India as the worlds second largest arms importer, with a 9.5% share of the global arms import market. India had survived over the years on technology transfer from Russia or import of weaponry. The MIG 21, SU 30 and T 90 tanks were all technology transfer. India’s own share was dismal.
The basic cause was the Indian policy of 1956 which placed all defence production in the hands of the Ordnance Factory Board (OFB) and Public Sector Undertakings (PSUs), keeping private sector away.
Vital foreign exchange was spent on arms imports and India remained at the mercy of arms exporters for maintenance and spare parts. To curb this, in 2001, the government for the first time introduced FDI cap in defence industries.
The figure was 26% and there were no takers. It was raised to 49% in 2014 and 74% in 2020. Currently, the government has displayed its intent in local production or global companies manufacturing in India, rather than import.
For a change, even in domestic production, the emphasis appears to be the private sector rather than government undertakings. The issuance of orders for 40 C 295 aircraft to Tata concerns for implementing Transfer of Technology production, rather than HAL, is a turning point. The government intent of pushing Atmanirbhar was evident from Aug 2020. It began issuing list of items on which there would be a ban of imports from specific dates. The first list comprised of 101 items followed by multiple other lists with increased numbers. Rajnath Singh even stated that the numbers will increase exponentially with time.
Simultaneously, the capital share of the defence budget (meant for procurement) began being divided between domestic and foreign procurements, with greater emphasis on domestic. Rajnath Singh had stated in Feb 2021 that 63% of the defence procurement budget was earmarked for domestic procurement. However, what is being missed is the funds spent by government companies to import parts from abroad to meet their production requirements. As an example, engines for the Tejas aircraft remain imported but would be considered under domestic. This implies that the DRDO and private sector must concentrate on specific technologies.
To strengthen its message on domestic procurement, the government recently cancelled plans of the Coast Guard to procure short range surface to air missiles and 14 helicopters from abroad, insisting they be domestically produced. A number of other procurement demands are also under the scanner. It was reported that in a meeting with the PM,in early December, it was decided that strong measures need to be taken to push the armed forces into domestic procurement.The government has also been attempting to bring in global defence manufacturers to establish facilities in India.
This attempt has not been very successful thus far. Most joint ventures in the country are assembly plants for companies which have won defence contracts in India. The K 9 Thunder factory in Gujrat is an example. Addressing a seminar of Society of Indian Defence Manufacturers, in December 2021, Rajnath Singh stated, ‘We have an estimated Rs 85,000 crore industry of aerospace and defence. The contribution of the private sector in this has increased to Rs 18,000 crore.’
Rajnath Singh added, ‘defence exports from India during the last seven years have been more than Rs 38,000 crore.’ The recent sale of the BrahMos to Philippines for an estimated amount of USD 375 Million is a major achievement. As per official data, India’s global exports in 2018-19 stood at a paltry USD 1.5 Billion, placing India in the list of the top twenty-five (23rd) defence exporters. The government has set an export target of Rs 35,000 crore (USD 5 Billion) by 2024-25. To boost exports the government is empowering its defence attaches posted in Indian missions. They attend an annual conference where they are apprised of Indian defence manufacturing.
The recent India-Russia and India-Central Asian nations summits resulted in agreements in which India and Russia would participate in joint defence ventures in Central Asian nations. In addition, India would supply spares for Russian equipment, manufactured under license in India to these countries, which continue operating Russian equipment. These are small steps but unless taken, Indian exports would remain stalled.
Its strong economy and strong army know a nation’s strength. India has to therefore become self-reliant – Atmanirbhar – to defeat the enemy.The Indian Army accounts for more than half of the total defence budget of India, with most of the expenditure going to the maintenance of cantonments, salaries and pensions, instead of new arms and ammunition.
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