India is possibly the only nation on the globe which has land disputes with nuclear powered adversaries on both fronts. Both, China and Pak operate in unison. As a nation, India cannot let its guard down even for a moment. Its armed forces need to possess capabilities to thwart misadventures from both adversaries. These capabilities, till recently, were largely acquired through imports. In 1965, 71 and post the Pokhran nuclear test many nations placed restrictions on supply of spares and weapon systems to India. Yet we refused to learn and improve our own defence research and manufacturing capabilities.
The SIPRI report of 2021 listed India as the world’s 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.
Currently, India is compelled to ignore CAATSA as almost 65% of its military equipment is of Russian origin. In case India acts against Russian interests, its defence capabilities could be impacted. As the Indian foreign secretary mentioned that without Russian spare parts and maintenance help, ‘our ships won’t sail, our planes won’t fly.’ With the growth of the domestic defence sector this would be offset, however would be decades before that happens, as equipment once inducted continues in service for a prolonged duration.
To create a level playing field and send a strong message to government undertakings, the government split factories under the OFB into seven entities. These would now compete on a common platform with the private sector. It is hoped that with this there would be a change in their culture and work ethics. The first battle between these entities and the private sector is on the contract for the new army unform. The army is keen on public tenders including private companies whereas government owned factories desire it be given to them. In all probability, the contract would be by open tendering.
India is slowly moving forward on Atmanirbhar Bharat. However, unless it invests in key technologies, the expenditure may be under the domestic head but utilized for imports. Further, India needs to concentrate on displaying Indian equipment in global defence exhibitions to enhance its export market. Finally, if we are to remain a global military power, the domestic manufacturing and R and D has to grow manifold, supported by central funding.