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India’s Defence Exports Reaches an All-time High

GS Paper 3

 Syllabus: Internal Security

 

Source: IE

 Context: India’s defence exports soared to a record high of Rs. 21,083 crore in FY 2023-24, marking a remarkable growth of 31 times over the past decade and a 32.5% increase from the previous fiscal year.

 

Key achievements:

  1. Record High Exports: Indian defence exports reached an all-time high of Rs. 21,083 crores in FY 2023-24, indicating a substantial growth trajectory.
  2. Remarkable Growth: The defence export sector witnessed a remarkable growth of 31 times over the past decade, compared to FY 2013-14, showcasing significant expansion and development.
  3. Increased Export Authorizations: The number of export authorizations rose to 1,507 in FY 2023-24, indicating a growing demand for Indian defence products and technologies in the global market.
  4. Private Sector Contribution: The private sector played a significant role, contributing approximately 60% to defence exports, highlighting the increasing participation and capability of private defence firms in meeting export demands

 

How does high defence export help India?

Benefit Explanation
Economic Growth Boosts the economy through increased revenue, job creation, and enhanced manufacturing capabilities.
It reduces India’s import dependence. India allocates around 1.8% of its GDP towards defence spending
Technological Advancement Drives innovation and technological growth in the defence sector, fostering advancements in other industries.
Diplomatic Relations Strengthens diplomatic ties with importing countries, facilitating strategic partnerships and cooperation.
Global Influence Enhances India’s stature in the global arena, positioning it as a reliable defence partner.
India has been successful in exporting products such as personal protective items, offshore patrol vessels, and avionics to countries like Maldives, Sri Lanka, Russia, France, Nepal, Mauritius, Sri Lanka, Israel, Egypt, the UAE, and Chile
Self-Reliance Reduces dependency on imports, promoting indigenous production and self-sufficiency in defence capabilities.
Military Modernization Supports modernization of armed forces by providing access to advanced technologies and equipment.
Balance of Trade Contributes to a positive balance of trade, helping to offset costs of defence procurement and imports.
Integration with Global Defense Value Chain Exporting defence products to major countries like Italy, Nepal, etc., integrates India into the global defence value chain, enhancing its strategic relevance and influence in the international arena.

 

Steps taken by India:

Steps Related Steps Taken
Enhanced Foreign Direct Investment (FDI) Liberalization of FDI policy allowing up to 74% FDI under automatic route and 100% by government approval (e.g., The Swedish Arms Major SAAB’s Announcement: First 100% FDI project for manufacturing Carl Gustav M4 rocket system in India.)
Innovation for Defence Excellence (iDEX) Launch of iDEX scheme involving Start-ups & Micro, Small and Medium Enterprises (MSMEs).
Defence Acquisition Procedure (DAP) 2020 Implementation of new procurement category – Buy (Global-Manufacture in India). The Defence Acquisition Procedure ensures 50% indigenous content in procurement.
Establishment of Defence Industrial Corridors Establishment of two Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu
Priority to the procurement of capital items falling in the Buy Indian (IDDM) Category Notification of four ‘Positive Indigenization Lists’ of a total of 411 items of Services and three ‘Positive Indigenization Lists’ of a total of 3,738 items of Defence Public Sector Undertakings (DPSUs).
Simplification of Industrial licensing process with longer validity period.
Rationalized Defence Product List which required an Industry License.
Launch of an indigenization portal namely SRIJAN to facilitate indigenisation by Indian Industry including Micro, Small and Medium Enterprises (MSME).
Financial Investments Increased Domestic Procurement Budget: From 40% to 75% of the total capital procurement budget dedicated to domestic procurement.
Increasing Private Contributions
DRDO Review of Defence Research and Development Organisation (DRDO) and focus on building “Fit to Purpose” capabilities
Participation of Women Initiatives like Nari Shakti and the opening of Sainik Schools and the National Defence Academy to women have significantly increased the participation of women in the armed forces.
Naval Platform Development Development of naval platforms including projects like the INS Vikrant and Project 17A frigates.
Other Developments Launch of Mission DefSpace

 

 

Issues with India’s defence exports include:

  1. Failure to Convert Interest into Business Action: Despite interest from countries like Indonesia, Malaysia, and others in products like BrahMos and Akash missile systems, India has struggled to translate this interest into concrete business deals.
  2. Inability to Secure Big Naval Defence Orders: India has faced challenges in securing significant naval defence orders from countries such as Oman, Myanmar, Mauritius, and Vietnam.
  3. Lack of Competitiveness: Indian defence products are often perceived as having lower quality and higher costs compared to major exporters like the US, Russia, and Israel.
  4. Limited Export Portfolio: India’s defence exports are restricted to a few countries and product categories, hindering its ability to fully tap into the global defence market.
  5. Bureaucratic Hurdles: The defence export process in India involves bureaucratic hurdles and red tape, making it challenging for exporters to navigate.
  6. Unclear Policy: India lacks a well-defined defence export policy, leading to confusion and uncertainty among potential exporters.
  7. Dependence on Imports: Despite strides in indigenization, India still relies heavily on imports for its defence equipment, limiting its capacity to export advanced defence technology.

 

To boost its defence exports, India can focus on:

  1. Dedicated Export Infrastructure: Establishing specialized infrastructure for training, market intelligence, and handholding of defence exporters, including training programmes for PSU officers and setting up a dedicated Export Promotion Council for the Defence Sector.
  2. Trade Support: Providing dedicated support from regulatory agencies to streamline approval processes for production and export compliances, and facilitating participation in trade fairs, Buyer-Seller Meets, and knowledge-sharing platforms.
  3. R&D Infrastructure: Exploring joint or co-development opportunities with other countries through the Department of Defence Production, and being open to sharing R&D infrastructure with potential buyers, such as offering fighter aircraft or rocket launcher systems developed through joint/co-development arrangements.

 

Conclusion

Self-reliance in defence manufacturing is significant not only for India’s defence capabilities but also for ensuring sovereignty and security. Building a private industrial base with proactive policies, funding RnD, creating low-interest regimes to bring down capital costs, addressing issues of exchange rates and providing stability can help India’s defence manufacturing sector become globally competitive.

 

Mains Link:

Foreign Direct Investment (FDI) in the defence sector is now set to be liberalized: What influence this is expected to have on Indian defence and economy in the short and long run? (UPSC 2014)

 

Prelims Link:

Consider the following in respect of the Indian Ocean Naval Symposium (IONS): (UPSC 2017)

  1. The inaugural IONS was held in India in 2015 under the chairmanship of the Indian Navy.
  2. IONS is a voluntary initiative that seeks to increase maritime cooperation among navies of the littoral states of the Indian Ocean Region.

 

Which of the above statements is/are correct?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

 

Ans: B

 

Which one of the following is the best description of ‘INS Astradharini’, that was in the news recently? (UPSC 2016)

(a) Amphibious warfare ship
(b) Nuclear-powered submarine
(c) Torpedo launch and recovery vessel
(d) Nuclear-powered aircraft carrier

 

Ans: C