Defence Exports

General Studies Paper 3

India’s defence exports for 2021-22 were estimated at ₹13,000 crore, the highest ever.

• The United States was a major buyer, as also nations in Southeast Asia, West Asia and Africa.
• The private sector accounted for 70% of the exports, while public sector firms accounted for the rest.
• Earlier, the private sector used to account for 90% but now the share of defence public sector units had gone up.
• While India’s defence imports from the U.S. have gone up significantly in recent years, Indian companies have been increasingly becoming part of the supply chains of U.S. defence companies.
• In January, India signed a $374.96-million deal with the Philippines, its single biggest defence export order, for the supply of three batteries of shore-based anti-ship variant of the Brahmos supersonic cruise missile.

Issues Retarding Defence Exports

• Excess reliance on Public Sector: India has four companies (Indian ordnance factories, Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL) and Bharat Dynamics Limited (BDL)) among the top 100 biggest arms producers of the world.
• Policy delays: In the past few years, the government has approved over 200 defence acquisition worth Rs 4 trillion, but most are still in relatively early stages of processing.
• Lack of Critical Technologies: Poor design capability in critical technologies, inadequate investment in R&D and the inability to manufacture major subsystems and components hamper the indigenous manufacturing.
• Long gestation: The creation of a manufacturing base is capital and technology-intensive and has a long gestation period. By that time newer technologies make products outdated.
• Unease in doing business: An issue related to stringent labour laws, compliance burden and lack of skills, affects the development of indigenous manufacturing in defence.
• Multiple jurisdictions: Overlapping jurisdiction of the Ministry of Defence and Ministry of Industrial Promotion impair India’s capability of defence manufacturing.
• Lack of quality: The higher indigenization in few cases is largely attributed to the low-end technology.
• Lack of R&D: A lip service to technology funding by making token allocations is an adequate commentary on our lack of seriousness in the area of Research and Development.
• Lack of skills: There is a lack of engineering and research capability in our institutions.

Steps taken by the Centre to boost defence production

• Licensing Relaxation: Measures announced to boost exports since 2014 include simplified defence industrial licensing, relaxation of export controls and grant of no-objection certificates.
• Lines of Credit: Specific incentives introduced under the foreign trade policy has facilitated Lines of Credit for countries to import defence product.
• Indigenization Lists: On the domestic front, to boost indigenous manufacturing, the Government had issued two positive indigenization lists consisting of 209 items that cannot be imported.
• Budgetary Allocation: In addition, a percentage of the capital outlay of the defence budget has been reserved for procurement from domestic industry.

There is a need to create an environment for greater participation of private industry, a stable macro-economic and political environment, and a transparent business environment which encourages fair competition