Mint Explainer: India’s defense industry is spreading its wings abroad

In Malaysia, HAL can sell its repair and maintenance services to that country, and also use the office as a gateway to the larger Southeast Asian market. If HAL wins the Malaysia tender, it will be the second major victory for the Indian defense manufacturing after BrahMos Aerospace signed a $375 million deal to sell three batteries of BrahMos cruise missiles to the Philippines earlier this year.

The government says Argentina, Australia, Egypt, the US, Indonesia and the Philippines have also shown interest in Tejas.

If the big ticket Tejas deal happens, it will give a further boost to India’s defense exports which have been growing for the past few years.

Defense exports increase

India’s defense exports were 1,941 crore in 2014-15. This has increased to 13,000 crores in 2021-22. This is an increase of more than six times.

exports were 2,059 crore in 2015-16, 1,522 crore in 2016-17, 4,682 crore in 2017-18, 10,746 crore in 2018-19, 9,116 crore in 2019-20 and 8,435 crore in 2020-21. According to the Defense Ministry, 70% of the export contribution in 2021-22 came from the private sector and the remaining 30% came from the public sector.

In 2011, the government announced a Defense Production Policy to achieve self-reliance in the design, development and production of defense equipment; To create favorable conditions for private industry to play an active role; To enhance the capacity of SMEs in indigenization; and expanding the country’s defense R&D base. This policy was the beginning of India’s defense export vision.

The increase in exports in the last few years has resulted in several steps taken by the government such as simplification of licensing and no-objection certificates for defense manufacturing, offering loans to small countries for arms purchases, import controls, and India. Active role played by foreign missions of

A major push to exports comes through increased indigenization which creates domestic manufacturing capacity. The government has issued three “positive indigenization lists” over the years for items that cannot be imported and must be purchased domestically. Offset, a foreign seller of arms in India is required to reinvest part of the contract value in India. Defense exports also boosted The government released a draft Defense Production and Export Promotion Policy in 2020 outlining comprehensive guidelines to boost defense exports.

What does India export and to which countries?

The BrahMos cruise missiles are an exception to India’s defense exports. India exports mostly parts and components, parts and sub systems.

Items exported by India include personal protective gear, offshore patrol vessels, advanced light helicopters, SU avionics, radio and coastal surveillance systems, armor MoD II launchers, parts for radars, electronic systems and light engineering mechanical parts.

Some of the major export destinations for India’s defense products are USA, Myanmar, Sri Lanka, Italy, Maldives, Russia, France, Nepal, Mauritius, Sri Lanka, Israel, Egypt, United Arab Emirates, Bhutan, Ethiopia, Saudi Arabia, Philippines, Poland. , Spain and Chile.

The US was India’s biggest importer in 2021-22. But over the years India’s biggest importer has been Myanmar followed by Sri Lanka.

Can India meet the high target of 2025?

Encouraged by the growth in exports over the past several years, the government has set for itself an ambitious target of export price 35,000 crore by 2025. India’s exports in 2021-22 was 13,000 crores. Is it possible to achieve this target for Indian defense manufacturing?

Although India’s defense exports are increasing, they are still very low. India now ranks among the top 25 defense exporting countries, but accounts for just 0.2 per cent of the total global defense exports. And it is the largest defense importer along with Saudi Arabia. From 2017 to 2021, 50% of India’s defense exports were to Myanmar, followed by Sri Lanka at 25%. This shows that Indian manufacturers do not have access to more lucrative markets.

The government’s focus on indigenization will eventually be an effective solution to India’s one-sided defense trade, but the question remains how much India’s defense PSUs can deliver. Prior to 2021-22, PSUs accounted for just 10 per cent of India’s defense exports, with the remaining 90 per cent being held by private companies. In 2021-22, exports were still dominated by the private sector at 70 per cent.

Although the government has adapted policies for the development of the private sector in defense exports, for obvious political reasons, no government would like to see the private sector encourage more than a limit. This leaves the government to the public sector undertakings which have traditionally been viewed as slower and less efficient than the private sector, with exceptions of course. While indigenization in itself will empower exports as selected indigenous products can be exported, it may not be possible for PSUs to meet the higher export target when they also have indigenization targets. India last year reorganized 41 units into seven units under the Ordnance Factory Board. This will increase efficiency and accountability and more steps need to be taken in that direction.

HAL’s Tejas deal will certainly improve India’s defense manufacturing profile, and India needs more such deals. India has not had any major exports before BrahMos. Apart from spares, spares and spares, India needs a number of large export products. This will require more funds to start R&D.

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