Unsigned editorial in Business Standard: The Rs 40,000 crore challenge - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Monday 24 October 2022

Unsigned editorial in Business Standard: The Rs 40,000 crore challenge


India must multiply defence exports for Modi's aim of taking India into the league of the world’s top five defence producers, with an annual turnover of US $26 billion

By Ajai Shukla

Unsigned editorial, Business Standard

October 20th, 2022


Prime Minister (PM) Narendra Modi on Wednesday threw a challenge before the Indian aerospace and defence industry with his call to achieve an annual exports target of Rs 40,000 crore. Neither is this resolve is new, nor the figure. The aim of increasing defence exports ten-fold, from the existing level of 2,000-3,000 crore annually to over $5 billion (then Rs 35,000 crore), was first enunciated in the Defence Production Policy of 2018 (DPrP-2018). Mr Modi again made that call while addressing Defexpo 2020 in Lucknow. Helped by adding civil aerospace products export to that of defence kit, exports reached a high of Rs 13,000 crore this year. Even so, a three-fold increase is required for meeting the DPrP-2018 export target, which is a substantial challenge. 


Yet, it is not inconceivable. As the PM pointed out, defence exports have grown eight-fold in the last five years, with defence materials and equipment flowing to more than 75 countries. And the government has put its shoulder to the wheel, having apparently understood that multiplying defence exports is essential for meeting the DPrP-2018 target of taking India into the league of the world’s top five defence producers, with an annual turnover of US $26 billion (Rs 180,000 crore) – a two-fold increase over the current annual defence production of Rs 90,000 crore


Apparently aware of the magnitude of the challenge, the government has created a policy framework for boosting aerospace and defence exports. Defence attaches posted to Indian embassies abroad have been charged with seeking out opportunities to supply their host countries with Indian military equipment. New Delhi has created a liberalised trade environment for Indian defence exports by eliminating structural obstacles to trade in arms. India has already obtained entry into three of the four global export control regimes: the Missile Technology Control Regime, the Wassenaar Arrangement and the Australia Group. New Delhi has mustered all its diplomatic heft into obtaining entry into the fourth – the Nuclear Suppliers Group. New Delhi has offered friendly foreign countries such as Myanmar, Maldives and Sri Lanka credit lines to purchase Indian defence equipment. Defence Public Sector Undertakings (DPSUs) are now required to have 25 per cent of their turnover in exports. A nodal agency, the Indigenous Defence Equipment Exporters Association, was set up in October for processing defence export inquiries from prospective customers across the globe.


Even with these reinforcements to the structural framework, boosting defence exports exponentially requires a major change in emphasis. Instead of focusing on the export of low-value consumables such as ammunition, spare parts and aerospace components, India needs to concentrate on high-value, complex combat platforms. As the Indian military abandons its reluctance to take into its inventory indigenous platforms such as the Tejas Mark 1 and Mark 1A fighters, the light combat helicopters (LCH), Dhruv and Rudra helicopters, the Arjun tank, Akash air defence systems, Pinaka rocket launchers and a range of indigenous warships including corvettes, frigates and destroyers, potential customers legitimately ask why India’s military shrinks from buying these platforms. India’s military must lead the way by ensuring that the army, navy and air force induct indigenous weaponry into operational service and co-opt industry to incrementally develop and improve the products. The export of this weaponry creates economy of scale, brings down equipment prices for India as well as for buyer countries, and also generates strategic heft for India.

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