Our defence exports have increased seven times in the last eight years, informed the Prime Minister. We had achieved defence exports worth ₹13,000 crore and of this 70% was from the private sector.

Why in news?

• The Indian Defence sector, the second largest armed force is at the cusp of revolution.

India’s Defence Exports

• India has put out a range of military hardware on sale which includes various missile systems, Light Combat Aircraft (LCA), helicopters, warship and patrol vessels, artillery guns, tanks, radars etc.
• From 2016-17 to 2018-19, the country’s defence exports have increased from ₹1,521 crore to ₹10,745 crore, a staggering 700% growth.

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 were introduced under the foreign trade policy and the Ministry of External Affairs has facilitated Lines of Credit for countries to import defence product.
• Policy boost: The Defence Ministry has also issued a draft Defence Production & Export Promotion Policy 2020.
• 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.
• Defence Industrial Corridors: The government has also announced 2 dedicated Corridors in the States of TN and UP to act as clusters of defence manufacturing that leverage existing infrastructure, and human capital.
• Long-term vision: The vision of the government is to achieve a turnover of $25 bn including export of $5 bn in Aerospace and Defence goods and services by 2025.
• Push for self-reliance: The govt has identified the Defence and Aerospace sector as a focus area for the ‘Aatmanirbhar Bharat’ or Self-Reliant India initiative.

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.
• FDI Policy: The earlier FDI limit of 49% was not enough to enthuse global manufacturing houses to set up bases in India.
• R&D Lacunae: 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. It again leads us back to the need for a stronger industry-academia interface.

Way forward

• Reducing import dependence: India was the world’s second-largest arms importer from 2014-18, ceding the long-held tag as the largest importer to Saudi Arabia, says 2019 SIPRI report.
• Security Imperative: Indigenization in defence is critical to national security also. It keeps intact the technological expertise and encourages spin-off technologies and innovation that often stem from it.
• Economic boost: Indigenization in defence can help create a large industry which also includes small manufacturers.
• Employment generation: Defence manufacturing will lead to the generation of satellite industries that in turn will pave the way for a generation of employment opportunities.

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