Defence industry set for steep growth
The current turnover of the defence and aerospace manufacturing sector is Rs 85,000 cr
Ministry of Defence (MoD) hopes that India's defence and aerospace manufacturing sector will swell to Rs1 lakh crore in 2022. Spelling out broad contours of the government's vision of the domestic sector, Defence Minister Rajnath Singh recently observed that the amount will further soar to Rs5 lakh crore by the year 2047, when India will be celebrating the 100th year of Independence. He emphasised the need to modernise the armed forces and create a strong and self-reliant defence industry that can help in safeguarding the country from present and future threats.
The Defence Minister stressed the role of incorporating the private sector to achieve this ambitious vision. The current turnover of the defence and aerospace manufacturing sector is Rs 85,000 crore. The contribution of the private sector in India's defence and aerospace manufacturing will rise to over Rs1 lakh crore by 2047 from around Rs18,000 crore in the current year Singh hoped. India has a domestic defence industry of which 80 per cent is government-owned. The public sector comprises five defence public service undertakings (PSUs), 41 ordnance factories (OFB), four naval shipyards and defence R&D monolith - Defence Research and Development Organisation (DRDO) with its 50 labs all across the country.
Singh said defence and aerospace offer huge opportunities for micro, small and medium enterprises (MSMEs). "Some would say the defence sector is for the big industry. But it's not true. Today, more than 1000 MSMEs are working in the defence manufacturing sector," he said and added by 2024-25, India would become a net exporter of defence products.
India is one of the major arms importing countries in the world. The Prime Minister has urged Indian companies to take on the production of military hardware to reduce India's dependence on foreign-sourced arms and armaments. Last year, he set Indian companies a target of $5 billion (Rs 35,000 crore) in exports by 2025.
India has exported defence equipment worth Rs 8,434.84 crore in 2020-21 compared to Rs 1,940.64 crore in 2014-15, the Ministry of Defence (MoD) said in answer to a question in the current Session of Parliament. According to the Stockholm International Peace Research Institute (SIPRI), India accounted for 0.2 per cent of the share of global arms exports during 2016-20, making the country the world's 24th largest exporter of major arms. It represents an increase of 228 per cent over India's export share of 0.1 per cent during the previous five-year period of 2011-15. Myanmar, Sri Lanka and Mauritius were the top recipients of Indian military hardware, the report said.
Defence Minister Rajnath Singh has stated that India is ready to export different types of missile systems, Light Combat Aircraft (LCA), helicopters, multi-purpose light transport aircraft, warships and patrol vessels, artillery gun systems, tanks, radars, military vehicles, electronic warfare systems and other weapons systems to friendly countries.
The private sector accounts for 95 per cent of the country's defence exports. According to the Department of Defence Production official website, about 50 Indian companies in the private sector have contributed to defence exports. Some of the major export destinations for defence products have been Italy, Maldives, Sri Lanka, Russia, France, Nepal, Mauritius, Sri Lanka, Israel, Egypt, UAE, Bhutan, Ethiopia, Saudi Arabia, Philippines, Poland, Spain and Chile etc. The major defence items being exported are Personal Protective items, Offshore Patrol Vessels, ALH Helicopter, SU Avionics, Bharati Radio, Coastal Surveillance Systems, Kavach MoD II Launcher and FCS, Spares for Radar, Electronic System and Light Engineering Mechanical Parts etc.
Keeping this in mind, the Ministry of Defence has set a target to achieve a turnover of Rs 1,75,000 crore ($25 billion) in aerospace and defence goods and services. The government is actively promoting an export-oriented defence industry under the 'Make in India, Make for the World' mantra. India has set aside Rs 70,221 crore – 63 per cent of the military's capital budget for 2021-22 for buying locally produced weapons and systems to boost defence indigenisation. Last year, the Ministry spent over Rs 51,000 crore or 58 per cent of the capital budget on domestic purchases.
To reduce dependency on imports, the government has decided not to import 209 military equipment under a staggered timeline to promote the domestic defence industry and indicated that the items under the list may touch 1,000. In August last year, the government announced that India will stop the import of 101 weapons and military platforms like transport aircraft, light combat helicopters, conventional submarines, cruise missiles and sonar systems by 2024.
A second list, putting import restrictions on 108 military weapons and systems such as next-generation corvettes, airborne early warning systems, tank engines and radars, was issued a few months later. This policy initiative is considered a big step towards self-reliance in defence
The government has initiated a series of measures in the last couple of years to encourage the domestic defence industry. Among steps taken by the government to boost domestic hardware, production was the revision of the 2016 Defence Procurement Policy into the Defence Acquisition Procedure 2020.
In May last year, the government announced increasing the FDI limit from 49 per cent to 74 per cent under the automatic route in the defence sector. Also, the government is touting the corporatisation of the over 200-year-old Ordnance Factory Board (OFB) into six entities as the biggest reform in the defence sector after Independence.
SIPRI in its annual report of 2021 disclosed that India's arms imports fell 33 per cent between 2011-15 and 2016-20 and added that the country has taken a slew of measures to cut dependence on imported military hardware. The latest import data is a clear indicator that the country's drive towards Atmanirbharta (self-reliance) is showing results.
But SIPRI said India's military imports are likely to grow over the next five yeaRs "As India perceives increasing threats from Pakistan and China and as its ambitious plans to produce its own major arms have been significantly delayed, it is planning large-scale programmes for arms imports. Based on its outstanding deliveries of combat aircraft, air defence systems, ships and submarines, India's arms imports are expected to increase over the coming five years," the report concluded.
(Author is a journalist who writes on defence, strategic affairs, security and conflict)