Steps by Prime Minister Narendra Modi to spur defence manufacturing, if properly implemented, open up the possibility of hitting that figure by 2025, defence production secretary A. K. Gupta said. The challenge is to boost private-sector investment and technological expertise, he said.
“This will not only take us toward the goal of self-reliance in defence production, but will also create tremendous employment opportunities,” Gupta, one of the top bureaucrats in India’s defence ministry, said in the interview in New Delhi last month.
India sells about $150 million of arms overseas yearly—a fraction of the $64 billion in worldwide defence trade—ranging from parts for Russia’s Sukhoi fighter jets to a naval vessel recently commissioned in Mauritius. The nation relies on strained state manufacturers that lack some of the expertise of global defence majors, signalling a need for more private-sector involvement even as companies are wary of difficult business conditions.
“India’s exports target seems ambitious,” said Deba R. Mohanty, a defence analyst and chairman of Indicia Research and Advisory in New Delhi. “If it’s able to meet such targets, then it will in all likelihood be a competitor to many countries, including China.”
The sectors where India has export potential include naval ships, helicopters and components for aircraft, according to consultant PricewaterhouseCoopers Llp.
China’s defence exports reached $1.5 billion in 2014, the eighth-largest in the world in a ranking dominated by the $23.7 billion sold by the US, according to IHS Inc. research. India imported $5.6 billion, the most after Saudi Arabia.
India estimates exports of materiel more than doubled over the two fiscal years ended March 2015 to Rs.990 crore.
Modi’s policy changes include fewer curbs on foreign investment in defence, looser export controls and a reworked procurement policy that’s set to encourage domestic output. His government has authorized about $65 billion of arms purchases since taking power in May 2014 and is targeting a major naval expansion with locally made ships.
The administration is also sharing the blueprints of state equipment—such as the Rustom drone—with the private sector for the first time, to spur technological development and possible overseas sales.
Companies ranging from Larsen and Toubro Ltd, India’s biggest engineer, to Airbus Group SE sense opportunities from less onerous rules and the drive for modernization.
But there’s a long way to go.
Modi in April scaled back a long-pending order for 126 Dassault Aviation SA Rafale warplanes, which stalled partly because the tender included the challenge of making 108 of the complex jets at India’s state-run Hindustan Aeronautics Ltd.
In the end, the premier opted for 36 Rafales from France in fly-away condition. France’s Safran SA subsequently shelved plans to make engine parts for Rafale aircraft in India. The episode shows the task Modi faces to catalyze a defence-industrial complex.
State companies account for more than 80% of defence production and are already stretched, according to Anurag Garg, a director of defence at Strategy&, a consulting group of PwC. Depending on the private sector to spur exports significantly would need companies to design weapons systems to sell abroad, and that’s no easy task, he said.
The government is trying to do its bit by improving the policy framework, but the push needs the support of industry, said Gupta from the defence ministry.
“Industry also needs to come up and accept the challenge,” he said. Bloomberg (livemint.com)