India’s defence exports have grown six times in the previous 5-6 years, and Made in India defence equipment and services are provided to more than 75 countries. In Australia, the defence and security sector is a critical component of the country’s national security and strategic priorities.
The Australian government has made significant investments in the sector, with a focus on building a modern and agile defence force. With India’s shift toward ‘Make in India’ and Australia’s nascent export-oriented defence manufacturing sector, Australia and India are exploring opportunities for enhanced defence industry cooperation.
RISE IN INVESTMENTS:
Over the last five years, India has been ranked among the top importers of defence equipment to gain technological advantages over rival countries such as China and Pakistan. To modernise its armed forces and reduce dependency over external dependence for defence procurement, several initiatives have been taken by the government to encourage ‘Make in India’ activities via policy support initiatives. India is one of the strongest military forces in the world and holds a place of strategic importance for the Indian government. The top three largest market segments of the Indian defence sector are military fixed wing, naval vessels and surface combatants, and missiles and missile defence systems. Some of the major defence manufacturing companies in India are Bharat Earth Movers Ltd. (BEML), Bharat Electronics Ltd. (BEL), and Hindustan Aeronautics Ltd. (HAL). The Indian defence manufacturing industry is a significant sector for the economy. The industry is likely to accelerate with rising concerns of national security. Demand for defence equipment in India has been growing due to the ongoing territorial disputes with Pakistan and China over the ownership of the Northern State of Kashmir and the North Eastern State of Arunachal Pradesh, respectively.
India’s defence import value stood at US$ 463 million for FY20 and is expected to be at US$ 469.5 million in FY21. India targets to export military hardware worth Rs. 35,000 crore (US$ 5 billion) in the next 5 years. As of 2019, India ranked 19th in the list of top defence exporters in the world by exporting defence products to 42 countries. Defence exports in the country stood at Rs. 4,794.13 crore (US$ 583.13 million) in FY 2022-23 (until September 5, 2022). The Indian defence sector ranks fourth in terms of firepower with a score of 0.0979 (with 0.0 being the perfect score) as per the global power index.
The Indian government has set the defence production target at US$ 25.00 billion by 2025 (including US$ 5 billion from exports by 2025). India is one of the world’s biggest defence spenders with a total outlay of Rs. 5.25 lakh crore (US$ 66 billion), accounting for 13.31% of the total budget and indicating an increase over the budget estimates of 2021-22 by Rs. 46,970 crore (US$ 5.9 billion).
INVESTMENTS AND GROWTH
The Indian Defence Manufacturing sector has seen some major investments and developments in the recent years:
Hindustan Aeronautics Limited (HAL) and Bharat Electronics Limited (BEL) signed a contract for the co-development and co-production of the Long Range Dual Band Infra-Red Search and Track System (IRST) for the Su-30 MKI under the MAKE-II procedure of Defence Acquisition Procedure (DAP) 2020 as a part of the Make in India initiative.
India’s defence production stood at Rs. 17, 885 crore (US$ 2.24 billion) in FY 2022-23, until 1 August, 2022.
India’s defence manufacturing sector recorded increased production to US$ 11.85 billion in FY22 from US$ 10.9 billion in FY21.
The aim of DefExpo-2022 is to build and achieve ‘Aatmanirbharta’ (self-reliance) in defence and increase defence exports to US$5 billion by 2024.
India and Japan have agreed to enhance bilateral security and defence cooperation, including in the area of defence manufacturing in May 2022.
The Startup Incubation and Innovation Centre, IIT-Kanpur (SIIC IIT-Kanpur) recently signed an MoU with Defence Innovation Organisation (DIO) to nurture and support start ups and SMEs in the defence sector through its flagship programme iDEX Prime.
In order to increase self-reliance in defence manufacturing it is necessary to develop robust government policies and some of the major Government initiatives are:
In the Union Budget 2022-23, Expenditure on salaries of armed forces and civilians, pensions, modernisation of armed forces, production establishments, maintenance, and research and development organisations.
Defence Research and Development Organization (DRDO) displayed a wide range of 430 products encompassing the strategic and tactical weapon systems, defence equipment and technologies developed in DefExpo 2022 which was held in Gandhinagar, Gujarat from October 18–22, 2022.
The allocation to the Ministry of Defence is the highest (13%) among all ministries of the central government.
Ministry of Defence has been allocated Rs 525,166 crore (US$ 67.66 billion).
In order to promote Private Industry, MSMEs and Start-ups in defence production ecosystem, the Ministry of Defence has allocated 25% of domestic capital procurement/ acquisition budget, amounting to Rs. 21,149.47 crore (US$ 2.72 billion), for domestic private industry in FY 2022-23.
The government has developed two Defence Industrial Corridors (DICs) in the country, one in Uttar Pradesh called the Uttar Pradesh Defence Industrial Corridor (UPDIC) and the other in Tamil Nadu called the Tamil Nadu Defence Industrial Corridor (TNDIC), with the goal of attracting Rs. 10,000 crore (US$ 1.31 billion) in investment in each.
THE FUTURE AHEAD
The Defence Ministry has set a target of 70% self-reliance in weaponry by 2027, creating huge prospects for industry players. Green Channel Status Policy (GCS) has been introduced to promote and encourage private sector investments in defence production to promote the role of private sector in defence production. Given the government’s emphasis on easing restrictions on foreign investment in order to achieve India’s goal of an “Atmanirbhar Bharat,” the growth trajectory of the Indian defence sector remain strong.
The Indian government is focussing on innovative solutions to empower the country’s defence and security via ‘Innovations for Defence Excellence (iDEX)’, which has provided a platform for start-ups to connect to the defence establishments and develop new technologies/products from 2021 to 2026. Working through partner incubators, iDEX has been able to attract the start-up community to participate in the Defence India Start-up Challenge (DISC) programme.
The Australian Government’s Defence Export Strategy, the ADF alone is insufficient to sustain Australia’s defence industry, and that new markets are required to fully realise the potential of Australian industry to support the ADF’s future needs. Australia has a number of world-leading success stories in the development of innovative defence capability, but not all of them may be available to international partners. Australia is well-positioned to become a worldwide cyber security powerhouse due to its key research fields, services-based economy, and top-notch educational system. Australian defence firms, especially SMEs, might access the Indian defence procurement market through partnerships with Indian SMEs.
The defence and security sector in both India and Australia is expected to experience significant growth in the future, driven by increasing geopolitical tensions, rising defence budgets, and the need to build a modern and agile defence force. The focus on technology and innovation is likely to increase in both countries in the coming years, with a focus on developing advanced defence technologies and strengthening their defence capabilities. Defence Science and Technology Groups from Australia and India are collaborating to create an acceptable governance framework.