India’s aspirations to become a major exporter of indigenous military platforms and assorted defence equipment continue to be circumscribed by numerous challenges and hurdles, concerning which the Ministry of Defence appears to be in denial.
In its quest to reach the export target of Rs 35,000 crores by 2025, the MoD is simply ignoring the formidable mix of domestic technological inadequacies, questionable quality control over finished products, fierce overseas competition from established materiel manufacturers and, above all, virtually impregnable defence markets.
These factors make the export goal chimerical, but that deters neither the MoD nor others in the government from boasting about the steps taken to boost export and tom-tomming optimistic export projections that are belied by the official statistics.
In August 2021, for instance, junior defence minister Ajay Bhatt informed the parliament that the authorised value of defence equipment exports had increased from Rs 1,940.64 crore in the Financial Year 2014-15 to Rs 8,434.84 crore in 2020-21, after hitting a record high of Rs 10,745.77 crore in FY 18-19.
The fact that during this entire six-year period the overall value of export authorisations had slumped three times in FYs 16-17, 19-20 and 20-21 is underplayed in the discourse on defence exports. Furthermore, actual export earnings that accrued to the national exchequer during this period are not necessarily equal to the value of the estimated export authorisations issued by the Department of Defence Production or DDP.
Going by the erratic trend of defence exports FY 14-15 onwards, it will entail major effort on the part of India’s private and public sector defence companies, as well as the MoD, to achieve the Rs 35,000 target over the next three years.
Bhatt also revealed that India’s principal defence exports included varied weapon simulators, tear gas launchers, torpedo loading mechanism gear, alarm monitoring and control systems, night vision binoculars, light weight torpedo and fire control systems, armoured protection vehicles, weapons locating radars, Hi-Fi radios, and coastal radar systems.
Undoubtedly, this is an impressive list, but the bulk of this equipment is of comparatively low value, and demand for it is by no means large enough to ensure regular and substantial revenue. In fact, the minister inadvertently conceded that the majority of these defence exports included ‘parts and components’ but did not elaborate further.
It is commercial truism, especially in the realm of arms trade, that India cannot become a major arms and defence equipment exporter merely by selling ancillary items, even though this does provide an opportunity for Indian manufacturers to integrate themselves with global supply chains.
Hence, India’s biggest challenge is to establish a niche for itself in the global defence market as a provider of dependable goods at competitive prices, followed up by effectual after-sales back-up, both of which pose a challenge. India is further handicapped in not being able to sell its wares to several potential customers like Saudi Arabia, Egypt, Australia, China, Algeria, South Korea, Qatar, and UAE, which are at present the largest importers. They are unlikely to abandon their long-established European and US suppliers.
Countries like China, Egypt and Pakistan, which is the 1oth largest importer and met 74% of its requirement by imports from China during FYs 2016-20 are, in any case, ruled out as potential importers of India-built military equipment because of obvious reasons. China, incidentally, has the unique distinction of being among the largest importers as well as exporters of arms.
According to the 2021 Stockholm International Peace Research Institute annual report, China, France, Germany, Russia, and the US accounted for 75.9% of the global arms trade during 2016-20. India’s nuclear rival China emerged as the world’s fifth largest arms exporter in 2013, but ironically this was largely due to the weapons market it had created in neighbouring Pakistan. Between 2016-20 Pakistan was China’s largest customer, accounting for 38% of the latter’s weapon exports.
Technologically, these five countries are, without doubt far ahead of India in offering a swathe of advanced weaponry, ammunition and associated equipment, a large proportion of which is in service with numerous militaries around the globe. Even the next lot of five largest materiel exporters – Israel, Italy, South Korea, Spain, and the United Kingdom – offer a variety of operationally proven equipment to sell in the world market that, according to Stockholm International Peace Research Institute, accounted for 14.4% of global military trade.
Together these 10 countries totalled some 90.3% of the world’s arms trade, leaving limited scope for states like India to break into this cutthroat market that requires not only competent and affordable goods but also skilled marketing and back up support to establish product viability and acceptability. After all, repeat orders for the equipment and lifetime maintenance support contracts are what most manufacturers endeavour to secure to sustain themselves in the defence market.
Matters were not overly dismal for India which does offer a range of indigenously designed and licence built military merchandise, but complications abound. In January the MoD, after protracted negotiations, clinched a $375 million deal with the Philippines to sell it three batteries of the BrahMos medium-range cruise missiles developed jointly by India and Russia, registering possibly the country’s largest ever such export order. But jubilation over the BrahMos sale has been short lived, following the punitive sanctions imposed on Russia by the US and its North Atlantic Treaty Organisation allies for invading Ukraine.
These embargoes on all Russian military entities, apart from other industries, also apply to Russia’s NPO Mashinostroyenia (NPOM) that has jointly developed BrahMos with India’s government-owned Defence Research and Development Organisation or DRDO and provides the missile system’s engine and seeker.
Consequently, the future of the BrahMos export order is, for now, uncertain but it could well be scrapped as the US-led alliance is furious with Moscow over its military misadventure in Ukraine, and eager to punish it. The situation could become more complex if the US decides to impose sanctions on under its Countering America’s Adversaries Through Sanctions Act (Public Law 115-44), or CAATSA.
Though unhappy with India’s decision to acquire S-400 Triumf Air defence Missile System from Russia, the US has refrained from imposing any sanction. India’s stand on the war in Ukraine could change that.
Additionally, India also has to contend with the issue of credibility. In 2005, Nepal had alleged that the INSAS (Indian Small Arms Systems) rifles, designed by DRDO in the 1990s, and supplied to the Nepalese Army by India, were responsible for the casualties its army suffered in clashes with the Maoist rebels in western Kalikot district in which 43 soldiers lost their lives.
Rubbing it in, the Nepalese army spokesman had said that the counter-insurgency operations would have been more efficient had it acquired better weapons. India rejected the charge but frequent complaint by the Indian troops in the subsequent years about the tendency of these rifles to jam and its magazine cracking in freezing temperatures, did not help.
A decade later in 2015, Ecuador had terminated its $142.5 million contract with India’s public sector Hindustan Aeronautics Limited (HAL) for seven locally designed Dhruv Advanced Light Helicopters (ALHs), after four of them crashed with a short space of time. HAL blamed the Ecuador Air Force for the accidents, but irreparable damage regarding the unreliability of Indian military platforms in a hugely quality conscious domain, was done.
This negativity is bolstered by India’s military often expressing concern over the reliability of locally supplied platforms and equipment in a milieu where reputations are difficult to build, but more difficult to reclaim once lost.
To conclude, MoD needs professional capability to anticipate future trends in global arms trade and to focus on that segment of the Indian industry which has the potential to compete in, and capture a bigger slice of, the global market. This calls for sober pragmatism. Celebrating trivialities, such as the indigenisation of miscellaneous nuts and bolts, which made headlines in the local media last December, is certainly not the way forward.