Fostering Defence Export Ecosystem
- 15 Feb 2023
- 12 min read
This editorial is based on “Time to foster defence export ecosystem” which was published in the Hindu on 14/02/2023. It talks about Issues with the Indian defence sector and steps that need to be taken.
As a result of the government's shift from viewing India as a net importer to a net exporter over the past few years, the defence sector has seen a quantum jump. India's defence exports reached a record USD 1.6 billion in 2021–22 and by 2023, it will surpass USD 2.2 billion.
A credible effort with a suitable policy framework have helped explore fragmented export opportunities, exception being BrahMos Missile export to the Philippines.
While the achievement needs to be celebrated, it is equally important to learn from the missed defence export opportunities. After successfully executing policy reforms and strengthening the business ecosystem, it is time to improve the export ecosystem.
What is the State of Defence Exports from India?
- India's defence export status has been improving in recent years, with the country emerging as a leading exporter of defence equipment to friendly countries. However, there have been missed opportunities.
- India’s defence exports for 2021-22 were estimated at Rs 13,000 crore, the highest ever.
- The private sector accounted for 70% of the exports, while public sector firms accounted for the rest.
- India has been successful in exporting products such as personal protective items, offshore patrol vessels, and avionics to countries like Maldives, Sri Lanka, Russia, France, Nepal, Mauritius, Sri Lanka, Israel, Egypt, the UAE, and Chile.
- However, there is a need to increase the value of defence exports and target larger markets to achieve the USD 5 billion export target set for 2025.
- India has failed to convert interest from countries like Indonesia, Malaysia, Singapore, Vietnam, Egypt, South Africa, and Brazil into business action for products such as the BrahMos and Akash missile systems.
- These countries have expressed interest in the BrahMos missile system, but India has not been able to convert this interest into business action.
- India has also been unsuccessful in clinching big naval defence orders from countries such as Oman, Myanmar, Mauritius, and Vietnam.
What are the Challenges with India’s Defence Export?
- Lack of Competitiveness:
- India's defence products are often considered to be of lower quality and higher cost compared to those of other major defence exporters like the US, Russia, and Israel.
- Limited Export Portfolio:
- India's defence exports are limited to a few countries and product categories. This limits its potential to tap into the global defence market.
- Bureaucratic Hurdles:
- India's defence export process involves several bureaucratic hurdles and red tape, making it difficult for exporters to navigate.
- Lack of Clear Policy:
- India's defence export policy is not well-defined, which creates confusion and uncertainty for potential exporters.
- Dependence on Imports:
- India still imports a significant amount of its defence equipment, which limits its potential to export advanced defence technology.
What are the Related Steps taken?
- According priority to procurement of capital items falling in Buy Indian (IDDM) Category from domestic sources under Defence Acquisition Procedure (DAP)-2020
- Notification of four ‘Positive Indigenization Lists’ of total 411 items of Services and three ‘Positive Indigenization Lists’ of total 3,738 items of Defence Public Sector Undertakings (DPSUs)
- Simplification of Industrial licensing process with longer validity period
- Rationalised Defence Product List which required Industry License
- Liberalisation of Foreign Direct Investment (FDI) policy allowing 74% FDI under automatic route
- Launch of Mission DefSpace
- Launch of Innovations for Defence Excellence (iDEX) scheme involving Start-ups & Micro, Small and Medium Enterprises (MSMEs)
- Implementation of Public Procurement (Preference to Make in India) Order 2017
- Launch of an indigenization portal namely SRIJAN to facilitate indigenisation by Indian Industry including Micro, Small and Medium Enterprises (MSME)
- Establishment of two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu
How can India Boost its Defence Export?
- Dedicated Export Infrastructure:
- The Export Infrastructure can be for training, hand holding and market intelligence systems.
- Training of PSUs, especially one engaged in international business can be prioritised, as the majority of the officers come from engineering backgrounds with limited knowledge or skill sets to manage international business operations.
- A dedicated Export Promotion Council, specific to the needs of Defence Sector where export promotion officers have an understanding of the policy framework of not only India but also that of other countries involved in defence production and exports.
- It is important for the Indian defence industry to become familiar with international treaties/protocols (Nuclear Supplier Group/Australia Group/Missile Technology Control Regime/Wassenar Group) as well as India's UN mandated and other international commitments and obligations through EPC officials.
- Trade Support:
- The Indian defence sector also needs a dedicated ‘Trade Support’ from regulatory agencies for speeding up approvals, both related to production and export compliances.
- For fragmented business opportunities, there is a need to expose the Indian defence sector to trade fairs, Buyer-Seller Meet (BSM), reverse BSMs, incubation opportunities with partner countries, and knowledge sharing.
- For platform based export (Tejas/Brahmos/Sarang/Light Combat Helicopter (LCH), Indian missions abroad can play a vital role in not only exploring the evolving opportunities but in tapping them up with dedicated diplomatic support during the prolonged negotiations.
- R&D Infrastructure:
- Based on the needs of the industry, the Department of Defence Production may explore joint or co-development opportunities with other countries.
- Another dimension of R&D infrastructure is that India’s defence industry should also be willing to share it with prospective friendly buyers against potential export orders.
- For Example: A fighter aircraft for Egypt or Rocket Launcher System for Bangladesh under joint/co-development arrangements.
Drishti Mains Question
Analyse the challenges and opportunities in the defence export ecosystem of India and discuss the measures that can be taken to enhance the country's potential in this sector.