Analysis | A Pandemic and an Opportunity: COVID-19 Could be a Boon for India’s Defense Industry
The COVID-19 global pandemic is forcing countries the world over to rethink government spending — reallocating funds from defense and security sectors to other priority areas along public health and economic fronts to contain the spread of the pandemic and manage its effects on the economy. India — by far the worst-affected country in South Asia — has already withheld 15 to 20 percent of funds allocated for the Ministry of Defense in the first quarter (April-June). Yet despite the fiscal strain imposed on New Delhi by COVID-19, the crisis also presents a unique opportunity for India to enhance the country’s defense exports at a point when the country is striving towards self-sufficiency in the sector.
As countries in South Asia face an unenviable budgetary balancing act between defense and public health, India stands uniquely poised to offer large-scale military exports as a more financially palatable alternative to more expensive Western, Russian, and Chinese arms. Pivoting from purchases to augmenting India's defense exports would not only expand India’s ‘Make in India’ initiative but might help strengthen bilateral ties between India and recipient countries.
Not only does an “inexpensive arms alternative” initiative play in harmony with Prime Minister Modi’s emphasis on ‘self-reliance’ or ‘Atma-nirbharta’ as a path forward through the pandemic, but would meet with India’s ambition to scale its defense exports to $5 billion over the next 5 years. In an effort to promote arms production under the ‘Make in India’ umbrella, the Finance Minister recently announced a slew of measures — including the indigenization of imported spares, corporatization of Ordnance Factory Boards (OFB), and an increase in the Foreign Direct Investment (FDI) limit in defense manufacturing under the automatic route to 74 percent from 49 percent.
Despite certain limitations in offering the high-tech versions as compared to China, Russia, and the West, India has the capacity to deliver arms that are both competent and cost-effective in the international market. At a time when the world economy is in recession due to COVID-19 and China is flexing its military muscles in the South China Sea, India can bolster the defense capabilities of the South Asian and Indo-Pacific countries with its affordable weapon systems. New Delhi has already started an export promotion drive by posting 10 additional defense attaches to different countries and opening offices of its Defense Public Sector Undertakings (DPSUs) in Vietnam, Singapore, Myanmar, and Oman. The initiative may give a rare boost to the Indian economy amid the global pandemic as well as allow New Delhi to penetrate the international arms market, and secure stronger ties with regional powers that align with India’s long-term interests.
Shielding Defense Exports
The ‘Make in India’ programme outlined by the Modi Government in 2014 laid emphasis on increasing defense production in India for three primary reasons: to expand the country’s manufacturing base; to create jobs for India’s increasing youth population; and to reduce India’s dependence on arms imports, which, according to the Stockholm International Peace Research Institute (SIPRI) is second only to Saudi Arabia. Though gains have been slow, India has successfully increased its arms exports through the ‘Make in India’ initiative, featuring in SIPRI’s list of arms-exporting countries for the first time at a modest rank of 23rd of the 50 largest arms suppliers worldwide — tied with Belarus — and accounting for 0.2 percent of the global arms market. The country’s defense exports increased by 700 percent in 2019-20 from 2016-17.
In the last decade, India has sold several weapons systems to its closest neighbors — principally Myanmar, Mauritius, and Sri Lanka — which collectively account for 85% of India's total defense exports. India’s preference for arms sales lies primarily with South Asian partners — a strategic calculation to encourage stronger bilateral ties with its neighbors. Policies to increase India’s outreach to potential regional allies have become crucial as Beijing continues to strengthen its presence in South Asia — particularly in the South China Sea and Indian Ocean — which saw great strides over the last decade.
However, India’s new emphasis on defense exports isn’t simply a geopolitical counter to China. The drive to ramp up India’s defense exports is part of a comprehensive shift in New Delhi’s Foreign Trade Policy to facilitate trade and ease of doing business in the defense sector, having recently amended its Standard Operating Procedures (SOP) to introduce electronic systems for bidding and registration. New Delhi recently incorporated a scheme of promotion and facilitation of defense exports for this purpose under a body run by officials from the Ministry of External Affairs, the Department of Commerce and the Ministry of Defense. The Indian government also established Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu to further augment India’s defense exports, attract manufacturers and investors, and generate employment opportunities across the country.
Marketing India’s Defense Exports
India’s multi-faceted internal and external security challenges have often driven New Delhi’s defense sector to develop and modernize multiple weapons systems across terrestrial, aerospace, and naval platforms. These indigenously-built weapon systems are at par with their competitors and have the potential of establishing India as a trusted arms exporter.
The Extra Mile: Land Power
India’s boundary disputes with three of its seven neighbors create unique security challenges for the country. For instance, in 2019, the constant cross-border skirmishes between India and Pakistan led to 3,200 cross-border recorded ceasefire violations. These ceasefire violations are usually perpetrated with the use of small arms, mortars, cross-border raids and artillery shelling. Further, the disputed region between India and Pakistan, Jammu and Kashmir, is also marred with terrorism. The major incendiary devices used by the terrorists in Jammu and Kashmir are primarily Improvised Explosive Device (IED) and grenades. In 2019, a major suicide attack in Pulwama led to the death in action of 40 soldiers of the Indian paramilitary forces. The precarious security situation has forced India to develop artillery and armor infrastructure specific to its needs. At the same time, domestic defense capacity-building has enabled India to distance itself from importing “off-the-shelf” equipment. To meet its securitization requirements, India has chosen a path of self-sufficiency.
Every military relies on versatile and dependable offensive power — simply put, every military relies on good artillery to initiate offensive maneuvers. The Advanced Towed Artillery Gun System (ATAGS) is a fully indigenously built artillery gun system developed by the Government’s Defense manufacturing and research agency, the Defence Research and Development Organisation (DRDO) in association with the private sector in India. The ATAGS production plant in Chennai is capable of producing up to 250 guns every year. At present, ATAGS is the only 155mm artillery gun with a six-round magazine in 30 seconds with a range of 48km. Further, its lightweight allows easy mobility in mountainous regions. The Indian government recently placed an order of 150 guns priced at $450 million, which will accompany 145 of their heavier American M777 Howitzer counterparts — which India is set to purchase for $700 million — in the Indian arsenal. The difference in cost per unit puts India in a unique position to attract more clients for its defense exports as countries begin to seek less expensive alternatives.
India’s internal security challenges have increased the demand and production of Mine Protected Vehicles (MPVs) which are deployed across a diverse range of sectors and terrains in India. Most heavily deployed in the volatile areas of Jammu and Kashmir and some parts of North-East India, the MPVs are produced by the OFB along with the DRDO at a rate of 70 vehicles per year. India has previously been successful at exporting its indigenously-built MPV ‘Aaditya’ to neighboring countries like Nepal, which purchased a total of 127 units between the years 2002 and 2011. India’s indigenously built weapon systems are combat-proven as well as competitive on the global market.
Chopping Prices: Air Power
To facilitate ground operations, air logistics and support play a key role in determining a favorable scenario. Due to operational requirements in extremely challenging and remote locations, to meet the requirements of India’s defense objectives, the Indian Air Force operates a robust fleet of helicopters. These helicopters specialize in operations in high altitude areas for logistical support, search and rescue operations, and casualty evacuation. Due to the topographic challenges, the Indian aviation industry has built helicopters that cater to these unique demands.
India also successfully showcased its Advanced Light Helicopter (ALH) which can operate efficiently in difficult terrains ranging from the highest battlefield in the world at Siachen (11,000 ft to 16,000 ft), to the hilly jungles of North East India, to the Thar Desert. Manufactured by Hindustan Aeronautics Limited (HAL), the ALH saw some success in exports on a loan/grant basis and through direct sales. At present, it is being flown by Mauritius and Nepal on a loan/grant basis. In 2008, India successfully exported its first batch of seven ALH worth $50.7 million to the Ecuadorian Air Force, which preferred the ALH over the Elbit, Eurocopter, and Kazan primarily because of ALH’s cheaper price tag.
Drawing on the ALH platform, India has introduced an offensive variant, also known as ALH (Mk iv) capable of performing anti-tank operations and providing close air support to ground troops. At present, India is the only operator of the offensive version of the ALH. However, countries currently operating the ALH have the freedom to opt into the attack-based platform to cut costs, as the two models share the same production and technical lines. Rounding out its air support capacity, India developed the Light Combat Helicopter (LCH) which shares many features of the ALH. The LCH is designed exclusively for combat and is designed with semi-stealth features capable of performing anti-armor and ground-support roles. The LCH successfully conducted its ‘Hot & High Altitude’ trials at 11,000 ft. At present, HAL — capable of producing 30 of the units per year — is processing an order for 200 of the LCH for the Indian armed forces.
Sea Fair Prices: Naval Power
India’s vast coastline creates many challenges for its Navy and Coast Guard that are shared by her South Asian neighbors. The 26/11 Mumbai attacks highlight how sea routes have provided a passage to infiltrating terrorists and drug traffickers, creating a need for robust surveillance and patrolling. To tackle these challenges, India has developed an indigenized coastal surveillance radar system — a set of radars and sensors that are data-linked and can provide a real-time feed to track and detect potential seaborne threats and other vessels, ranging from speed boats to tankers. India has exported 32 coastal radar surveillance systems to the Maldives and has plans to export it to Sri Lanka as well. India’s successful radar systems have also caught the attention of Myanmar, Thailand and Bangladesh. Effective patrolling requires data-linking with surveillance radars. The Offshore Patrol Vehicles (OPVs) are already on the market with completed orders to Sri Lanka and the Maldives. Integrating systems and platforms reduces operational and technical challenges and ensures optimal operationality.
Under the Make in India initiative, the ship-building industry — previously a state-dependent sector — is now seeing increased competition from the entry of private companies. The INS Chennai is an example of the increasing production value of India’s shipbuilding docks. The introduction of the private sector in shipbuilding introduced price competition which challenged the monopoly of the Mazagon Dock. The increased competition has also attracted foreign buyers, with Thailand expressing interest. India’s vast coastline requires extraordinary maritime readiness, prompting the need to indigenize the shipbuilding industry to remove reliance on foreign imports. India’s success in creating a self-reliant defense manufacturing industry indicates its growing capacity as a reliable arms manufacturer and exporter for South Asian countries.
Making the Most (Defense Equipment) of the Pandemic
While the pandemic provides a clear opportunity for New Delhi to assume the role of a leading regional arms exporter, India still tussles with challenges that have marred its production capabilities and include projects ‘getting stuck’ in various bureaucratic stages. The Modi government has taken the initiative to combat the looming shadow of red tape over India’s defense production. The Prime Minister’s Office has become directly involved in combating bureaucratic red tape which has plagued India’s defense sector. In addition, India still faces stiff competition from other regional arms manufacturing nations like China, Pakistan, and Turkey that also offer affordable weapons systems. Without strong checks and balances to executive power, Beijing, Islamabad, and Ankara also more easily overcome bureaucratic barriers to production.
One way forward for India would be to incentivize competition within the arms manufacturing industry and promote ‘Make in India’ to foreign defense companies. In this regard, the Indian government has already increased the FDI in the defense sector to 74 percent under the automatic route. Further, by aligning this with the Defense Procurement Procedure (DPP) will not only enable foreign defense companies to set up and have full control and ownership of manufacturing in India but also allow these companies to assume large contracts for full-combat platforms directly from the government. This combination will encourage foreign defense companies to relocate or outsource their manufacturing to India while allowing them ease of export from India. If successful, it would diversify the Indian defense market away from state monopoly, creating room for improvement in terms of R&D, technology, and human capital while enabling private Indian companies to flourish, thereby boosting the country’s defense capacity and the economy as a whole.
In addition, it is in India’s strategic interests to arm its South Asian neighbors with Indian arms to create a cooperative, self-sufficient defense ecosystem in the sub-continent. This not only allows for better cooperation and trust-building among the nations, but also prevents China, Russia and the West from infiltrating the South Asian arms market, which would be detrimental to India’s ‘Neighbourhood First’ policy.
India has the capability to assert itself as a major exporter of defense equipment through its indigenous platforms while at the same time transforming itself into a manufacturing and export hub for foreign defense companies. Although some of the systems produced are still progressing towards achieving parity with international competition, there is no doubt that they are dependable and easily deployed.
The range of India’s threats combined with the country’s varying terrain across all three of the armed services has led to the indigenization of weapons systems which would otherwise be too expensive to import. India should make use of its expertise to promote its exports to its neighbors and the wider international defense market as an inexpensive, reliable alternative source for defense equipment to countries facing stark budget cuts due to the ongoing pandemic. Not only would this help to promote India’s indigenous weapons systems but might also enable recipient nations to procure sorely-needed equipment at lower costs at a time when funding is being redirected. Moreover, with arms sales playing such an important factor in bilateral relations, India has nothing to lose.
Edited by: Cameron Vaské, Yatharth Kachiar
All views expressed in this article are solely those of the author, and do not represent the views of The International Scholar or any other organization.
Banner photo credits:
By Arpingstone - Own work, Public Domain,
https://commons.wikimedia.org/w/index.php?curid=5029925
