• Four domain experts give reasons for surge in defence exports from Rs 1,522 cr in FY17 to Rs 21k cr in FY24. What are benefits of defence exports? Which products should India export?

Total defence exports during 2004-05 to 2013-14 were Rs 4,312 crore, which has gone up to Rs 88,319 crore in the period 2014-15 to 2023-24. (Business Standard Ajai Shukla April 2, 2024). Niti Kiran also shared data on Defence Exports in the last seven odd years. Read Mint article Here is key data.

Defence Exports India (courtesy MINT)

Two things stand out. One is the sharp increase in export value from Rs 1,522 to Rs 21,083 crore in just seven years. Two, was high contribution of the private sector.

What were the reasons for this increase? Here is what four experienced professionals said.

Former Director General of Artillery, Indian Army Lt Gen P R Shankar assigned three reasons. “Good policy, Value for money, no Geopolitical strings attached.” 

Indian products are cheaper and come without conditions attached as is usually the case with the West.

A senior journalist who covered the defence sector for years known as expert 2 says, “Top reason is government committing to buy from indigenous defence industry - 75% … using embassies to promote indigenous hardware - actually collating the statistics of how much we are exporting (was loosely done before) and unashamedly plugging defence exports at the apex level.” 

In short, the surge is on account of atmanirbharta policy and focus.

Also, in FY 2023-24 a record 75% of the defence capital procurement budget, amounting to Rs 1 lakh crore, was allocated to the domestic industry. In October 2023 India released the Fifth Positive Indigenisation List for which there would be an import ban beyond mentioned deadlines.

These moves compel the armed forces to scout for local vendors, support local manufacture and take a collaborative approach. In effect, it builds a local supply chain.

A senior professional who retired from one of India’s largest defence product manufacturers code named expert 3 says, “Now teams from the armed forces visited our plants regularly to explore opportunities, there is a lot more transparency between the government and private sector, the bureaucracy is helping in getting orders from abroad.” 

She said there is a sea change in the attitude of government officers and added that the geopolitical situation in the last three years has helped too.

This MINT table shows that value of exports was 2016-17 Rs 1,522 cr, 2017-18 Rs 4,682 cr, 2018-19 Rs 10,746 cr, 2019-20 Rs 9,116 cr, 2020-21 Rs 8,435 cr and 2021-22 Rs 12,815 cr.

Whether it is coincidence or by design the increase in defence exports coincides with a rise in India’s international stature. Also, due to its inherent defence exports improve relations between countries. 

Yusuf Unjhawala, adjunct scholar Takshila Institute says, “Defence exports is not about weapons sale only, but also various goods and services in the defence sector. Indian companies are becoming suppliers to U.S. defence giants. 35% of Indian defence exports are to the U.S.” It is not known at the time of writing how invested leading Indian Information Technology companies are in the defence space. 

Suchet Vir Singh wrote in ORF, “The government’s changed outlook towards exports has also manifested in liberalised industrial licensing and certification policies for defence manufacturers.”

Another factor for surge in exports could be that U.S. sanctions post the Russia Ukraine war, have brought uncertainty about Russian supplies and the number of countries that Russia can export to.

India seized a geopolitical moment and got a new customer for Brahmos Missile in Philippines.

On defence products, India needs to emulate the Bajaj Auto model – Make for India and the World. 

Exports increase overall volumes, forces improvement in quality, reduces per unit cost and subsidizes defence research and development.  

What are the benefits of Defence Exports?

Expert 3 states these benefits i.e. Development of a strong supply chain, Technological Advances, tie up with engineering and metal research institutes, Development of Skilled cadre of Defence experts for both Hardware and Software, ⁠Research and Development focus on composites, metals and Navigation systems.

Plus exports generate employment esp. demand for skilled resources, steel if sourced domestically and contributes to GDP growth.

So what should India export?

Expert 3 says, “Anything that involves metal forging is good for India.” Thus, export of Tanks, ATGs, Shells, Barrels, Tank Wheels have potential. 

Expert 2 adds, “Light frigate / naval offshore patrol vessel, 3D tactical control radar, ⁠Pinaka Multi Barrel rocket launcher, ⁠full range of artillery - 105 and 130 mm, ⁠Light Combat Aircraft Tejas - all variants and Full range of light Helicopters - Light Combat (LCH), Light Utility (LUH), and Advanced Light (ALH).”

Export of arms should become an important part of India’s foreign policy. I believe that India must explore export of Brahmos Missiles to countries in Asia-Pacific esp. Vietnam and Indonesia. 

A review of the Line of Credits issued by EXIM Bank in the defence space show a value of app $ 805 million. If India has to achieve the ambitious export target of Rs 50k crore in five years, this figure might require to be increased. If large companies export, they have the balance sheet strength to provide payment over medium-long term. That might not be the case for smaller companies.  eSamskriti reached out to the Head-Lines of Credit at EXIM Bank for view but there was no response till the time of publishing.

A Defence Exports Promotion Board, with representatives from key stakeholders, could further facilitate exports. The government can use EXIM Bank, if not done so already, to open lines of credit to promote exports. 

Government policies reflect clarity of thought and focus. Surely, there will be learning’s. The potential is huge and waiting to be tapped.

Also read

1. Policy Recommendations for achieving India’s ambitious export target

2. A look at India’s weapon exports