Improving Indian Defence Industrial Capabilities


The Indian geostrategic locations, signs of emerging  Indian economy, improving strategic relationship with developed nations, India as a regional power has to have  a  advanced technology diversified Arms portfolio for its Armed forces through technology partnership. The Author analyses the way forward for improving its defence industrial capabilities.

The recent report by Stockholm International Peace Research Institute (SIPRI) for the period between 2016-20 indicated that India accounted for 9.5% of the global total arms imports emerging as the world’s second largest importer of major arms, with combat aircraft and associated missiles accounting for more than 50% of Indian arms imports. The reported decrease in imports by 33 percent witnessed between 2011-15 and 2016-20, should have come as a respite especially considering that India had been the world’s largest importer till 2014. However, this has not been the case as this decrease may not be really reflective of ground realities and definitely is not result of India progressively increasing domestic production to meet the requirement of arms and ammunition.  Worth mentioning, that till date there are number of big tickets deals that are yet to see the light of the day and quite a lot awaits to be signed. Thus, in reality, budget constraints and delays in new acquisition have meant a reduction in imports. However, the silver lining in the SIPRI report has been the fact that India accounted for 0.2% of the share of global arms exports during 2016-20, making the country the world’s 24th largest exporter of major arms. This represents an increase of 228% over India’s export share of 0.1% during the previous five-year period of 2011-15. Myanmar, Sri Lanka and Mauritius were the top recipients of Indian military hardware.

Arms Imports from Russia: Declining Trend

It needs no mention that India has remained the chief recipient of Russian arms and Russia is  still remaining top/largest supplier of weaponries to India. From air defence systems to missiles to nuclear submarines, the Soviet Union has enjoyed a longstanding, profitable defence export relationship with India. It is worth mentioning that as per SIPRI estimates, Russia has supplied India with arms worth $40-50 Billion since 1991. And coming years will witness a slew of multi-billion-dollar deals such as $5.43 Billion contract for S-400 Triumf missile, AK 203 Rifle, to name a few. This clearly made India dependent on Russia for decades for its ever-growing defence. However, in the recent years, Russia’s share has been decreasing in Indian arm imports pie. Somewhat, Russia has become the most affected supplier witnessing a decline of 49% for the period 2016-20. Some of the main concern about the past supplies have been: -

  • Unwillingness to transfer certain sensitive weapons systems and technology to India. Rather, in 2018, India withdrew from the joint development of Fifth Generation Fighter Aircraft (FGFA) and UAC/HAL II-214 Multi-Role Transport Aircraft (MTA) due to persistent delays and concerns about technology sharing.
  • Russian reluctance in meeting the so-called ‘Make in India’ clause in some defence contracts, including in a recently concluded government-to-government deal over the purchase of 200 Kamov-226T.
  • The quality of spare parts supply, delays and cost overruns in meeting delivery and repair contracts.

However, despite these limitations, Russia’s importance as the premier defence partner for India remains with almost half of the imports share still is accounted by Russia. Further, keeping in mind the profound bi-lateral and military relationship the two countries share dating back over 50 years, India can never think of  abandoning its defence ties with its long-time ally Russia who has always stood by the country.

Defence Arms Imports by India: Shifting Focus

Eventually, over the years India with focus on improving strategic relationship with developed nations started looking out for more diversified Arms portfolio with advanced technology and to avoid over-dependence on a single source, Russia. This was one of the main reasons which lead to shift its focus to defence equipment procurement from United States (US) which has been known for the development and manufacturing of world-class stealth defence technologies. Since 2008, Indo-US defence trade has steadily increased from under $1 billion to now over $18 billion having inducted a large number of US defence hardware, including Apache attack choppers, Chinook heavy-lift Helicopters, C-17 Globemaster, C-130J Super Hercules Transport aircraft, P-81 Maritime Patrol Aircraft and M777 ultra-light howitzers. And, considering just last three years, US have emerged as the major defence supplier to India and have signed numerous defence contracts worth Rs 32000 Crores displacing Russia which had a share of Rs 25400 Crores. However, most of the above-mentioned weapon contracts signed between India and US has been through government-to-government/FMS route with no competitive bidding.

India’s arms imports from France also increased by 709% while those from Israel increased by 82% in last five years. Further, smaller countries such as Uzbekistan and South Korea have also been started to be a part of India’s arms procurement journey. Rather, Uzbekistan was one of the largest arms exporters to India for three years in a row since 2009, while South Korea has significantly increased its share of arms exports in India in the last three years.

Enhancing Co-Production

It needs no highlighting that technology transfer plays a major role in arms procurement that India cannot develop indigenously as this is essential in getting the technological know-how and building of its own domestic industry. So, it is time that India takes a stronghold and goes ahead with the defence deals with countries offering joint development or co-production of weaponry and rather be on the same platform of buyer-seller relationship that it had been having with countries such as US and Russia. As seen, most of the procurements in recent years from US and Russia have not been come along with critical technology know-how. The technology sharing to India has been limited by both these countries.

On the contrary countries such as France, South Korea or Israel have successfully provided India the window for technology absorption as well as co-development, especially Israel which has emerged as foremost supplier of weapons and related high-end technology to India in recent years. The Israeli arms manufacturing base possesses niche specializations in many of the areas where India's defence industry is the most wanting, particularly UAVs, missile systems, precision-guided munitions, electro-optics, and, especially radars. The Israeli defence industry readiness in establishing joint ventures complement the ‘Make in India’ policy of India. For example, the Defence Research and Development Organization (DRDO) is engaged with Israel defence industry such as Elisra, IAI, Elbit and others in co-development of defence products and its collaborations fall in the areas of missiles, electronic warfare systems and main battle tanks.

Some of the other Indo-Israel joint ventures include Rafael Defence Systems and Kalyani Group for MRSAM kits and production of Spice 2000 (guided bombs), Israel Aerospace Industries (IAI) and Bharat Dynamics Ltd (BDL) for Milan ATGM, Barak-8 Air and Naval air defence missile systems, Israel’s Elbit Systems India Ltd and Adani Enterprises Ltd to manufacture UAVs, IAI and DRDO for MR-SAM system and, IAI and HAL and Dynamatic Technologies Ltd for production of UAVs. These are just few to mention, there are many more. These Israeli companies has successfully provided India with imperative and relevant technology transfer.  Moreover, Israel has even customized certain defence equipment and platforms as per India’s requirements which no other country has offered to India till date.

Besides, countries such as France, South Korea or Israel have successfully created niche in the high-end technology intensive defence equipment and platforms and do not hesitate in sharing their technologies. The successful co-production between South Korean defence firm Samsung-Techwin and its local partner, L&T for development of 100 self-propelled howitzers under a tender won in 2017, substantiates this fact. This has been a perfect example of partnership and technology absorption with close to 50% of the gun is indigenized and manufactured in India at L&T's Strategic Systems Complex and it will also be considered for exports in the future. Till date, all deliveries have been made ahead of the slated time window. Even when it comes to defence offsets, these countries have been more successful in helping in discharging of concrete offsets which can prove beneficial for Indian companies. One such example is of Reliance Defence which tied up with Dassault and is executing offset contract that came with the procurement of 36 Rafale jets for the IAF. The share of Reliance is expected to be around 3% of the Rs 30000 Crore Dassault Aviation offsets contract. The Nagpur facility of Dassault Reliance Aerospace Limited (DRAL) was initially making only cockpits for the French manufacturer’s Falcon business jets, besides other parts. Now the first set of doors that cover the twin engines of the fighter jets has been produced in Nagpur facility.

Also, to be noted that even imports from small Scandinavia countries such as Sweden has seen a rise. They also have been entering the Indian market by forming joint ventures such as SAAB which has various collaborations with public sector companies such as Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd (BEL), the Ordnance Factory Board various private and on various defence projects such as EW systems, radars etc. Rather, as early as 1980s, Sweden company AB Bofors was one of the few companies that had offered ToT in the 410 FH77 B02 howitzers that India purchased.

Way Forward

With India to spend $130 Billion in next five years on high technology military hardware, drones, precision weapons, radars, guns, sensors and aircraft, makes the country a lucrative defence destination which no foreign supplier or country can afford to lose their foothold. And, with India’s Defence Industrial Base still under developed, so it is likely that it will be taking the route of defence imports in coming years. However, the need of the hour is to guard our own self-interest and ensure that further imports come along with either joint or co-development or ToT which in turn will help in developing and strengthening the DIB. Especially, by opting for joint or co-development, India will be able to access the expertise the OEMs can bring along to jointly develop advanced platforms. This will help reduce the development cost and create world -class platforms. Moreover, these platforms will not only meet the requirement of the parent countries but also can be exported jointly, thereby helping India to increase its defence exports which will generate the necessary revues which is vital for the economic growth of any country. This can be done by expediting the ‘Strategic Partnership’ policy. Till date projects through SP model such Project 75I, Multi-Role Helicopters, Light Utility Helicopters awaits to be signed.

There is need to improve the pace of acquisition  and a definite shift from nomination to competitive procurement by providing level playing field.

Also, if India seeks to reduce its import burden then it is also vital to involve the competent private sector which undoubtedly has shown pioneering success in technological development/advancements but that has been more so through collaborations with foreign OEMs or for the matter of fact with the Public Sector (DRDO/DPSUs) as well. There is tremendous scope for improvement in the pace of acquisition through a definite shift from nomination to competitive procurement by providing level playing field. With the allocation of Projects on nomination basis to DPSU, the Make in India is turning as (assembled in India) through import as on an average, government-owned defence units undertake less than 15% of real value addition on projects they are awarded, with the rest being imports. Indian industry leaders are capable of building ‘system of systems’ say, for instance, a submarine, a ship, a complete communication solution, an FICV and a whole variety of weapon turrets.  Undoubtedly, there is seen some change in mind-sets in treating private Industry as part of National endeavor by the Defence Ministry, however still a long way to go to create true trust-based relationships and level-fielding which private sector has been calling upon. What is required is a change in the approach of Defence Ministry to transform to one of partnership with Industry to build indigenous capability.

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