- Apr 2, 2015
To speak about defence exports from India at a time when we routinely lament the fact that India imports nearly 70% of its defence hardware, would seem incongruous. But as they say, sometimes improbable ideas, if followed up with persistence and implementable plan, can come to fruition and so it is with the wish to turn India into a defence export hub in the next decade.
Defence export scenario in India, pre or post liberalization, has not achieved anything spectacular despite India having one of the largest defence industrial bases in the developing world. It has 41 Ordnance Factories (OFs), 9 Defence Public Sector Undertakings (DPSUs) and a fledgling private sector. And yet, the Indian defence industry has not managed to attain self-reliance or even self-sufficiency in the need that the armed forces have. Exports therefore become secondary in the list of priorities. As the figures indicate, India’s exports in the defence sector are around 4% of the hardware that is imported.
If handled right however, defence exports have the potential to boost manufacturing, generate huge employment and strengthen economic security. At the same time, export of defence hardware manufactured in India to friends and neighbours can become one of the contributing factors in India’s current attempt to recalibrate its foreign policy both at regional and global level.
There are numerous examples of countries leveraging export of military hardware for strategic and diplomatic advantages. There is no reason why India cannot follow the tactics practiced by the United States, China, Israel and Russia. In fact, for decades, the erstwhile Soviet Union exerted enormous influence on India through sheer weight of the military hardware it supplied to the Indian armed forces!
As a country aspiring to become a pre-eminent power in Asia, India should strategize on using defence exports as a powerful diplomatic tool. Exports and international trade are a commercial spin off to drive active research based on unique global demand, besides strengthening bilateral relations.
The country’s 'Act East' policy, for instance, aimed at extending India's engagement with South East Asian and ASEAN countries is ideally suited to become a major part of defence export strategy. With tension mounting in South China Sea and countries such as Philippines, Vietnam, and Indonesia looking up to India for help in beefing up their defence capability, New Delhi should be smart enough to take advantage of the situation and extend its influence beyond the immediate neighbourhood.
In 2013, India's participation in the Aerospace and Defence Exhibition in South Korea, was an eye opener in this context. For the first time, actual defence systems including missiles, radars, avionics equipment and naval systems made in India were showcased to an international audience outside the country. This exhibition displayed India’s technological prowess and immediately evoked serious business enquiries from countries in the region.
For instance, Airborne Radar systems, bridging systems, missile systems and sonars were in great demand. India has demonstrated the capability to design and develop complex military products. These are developed to meet perceived Indian threat scenarios. However, when it comes to exports, the requirement may need to be customised to meet their requirements. In such cases some of the features or requirements of Indian Qualitative Requirements (QRs) may become irrelevant. Sometimes the customer may look for a feature or specification that's not sought by Indian armed forces. Both will require study by a technical team that can support the Indian industry. This will have to be essential requirement of the export arm.
There are innumerable intangible benefits in following this strategy. But does India have a strategy? If it does not have one, what should be the way forward? Many experts have suggested different ways to chart out a fresh roadmap.
Here is another thought process.
So, what should be India's defence export strategy?
To begin with the MoD has already put up on its website, a startegy for defence exports, aligning it with the Foreign Trade Policy. As a next step perhaps, a policy framework that encompasses all aspects has to be evolved. The framework will have to take into consideration views of not only the government agencies but also private sector players and foreign manufacturers wishing to make India a production base. Indian laws, international conventions, ethical issues, bottlenecks and technological capabilities or lack of it will have to be examined before arriving at a comprehensive policy.
Before suggesting a possible future policy framework, some facts need to be reviewed. Currently, India is ranked 28th in the arms exporters list based on the volume of arms transferred. With an import: export ratio of 194:1, as compared to 1.3:1 in the case of Israel, 8.8:1 in the case of South Korea and 19.7:1 in the case of Singapore, India is not a big player in the export market. Another depressing figure often cited is that the average share of Indian arms exports in the total world’s arms exports pie stands at a measly 0.8%.
So far all that India exports is restricted to old variants of aircraft, ships and armoured vehicles, but the main revenue generation coming from supply of spare parts.
So what should be India's export policy consist of?
To start with, constitute an Indian Defence Exports Agency (IDEA) with participation of industry and other stake holders as a commercial arm of MoD. This can be a professionally run company duly registered under the Companies Act of 1956.
The company can be funded by the MoD through a separate budget allocation for establishment and business development. IDEA will thereafter create business models for self-sustenance. IDEA will be driven by clearly defined targets for promotion of exports from Defence sector.
IDEA can be tasked to identify suitable export markets, participate in various exhibitions abroad, be a part of all International Delegations of the GoI, Integrate with industry, create and sustain synergy with industry, integrate Life Cycle Support concepts, Integrate Services support and maintenance, create synergy between DRDO, design agencies, Engineering design houses, manufacturing houses and formulate a holistic approach towards exports of defence goods and services. The commercial arm IDEA will have to be empowered to establish JVs with industries (both National and International companies), where ever considered essential to have an access to market.
MoD has already talked about constituting a Defence Exports Steering Committee (DESC), under Secretary, defence production with representatives from HQ IDS, Services, MEA, MoC, DGFT, DDP, DRDO and IDEA. The role of DESC will be to make policies, review export clearance norms, formulate incentive schemes, and support IDEA for exports.
MoD can also establish an Export Clearance Authority (ECA). This will report to the DESC for guidance and higher direction for clearances of exports and issue of NOC. Fundamental principle of operation of the ECA will be guided by time-bound clearances and expeditious decision-making. Towards this IDEA will be armed with information of industry capabilities vis-a-vis export opportunities. IDEA will support the ECA with timely information and pro-active involvement with industry to be able to predict cases of exports.
In conclusion, the Commercial Arm (IDEA) can interface with the ECA and DESC for enhancing exports. Exports can be target driven through the corporate entity with full freedom and independence of action, duly enabled by the government. The government can formulate policies and procedures and IDEA can focus on enhancing exports.