India has been one of the largest importers of defence equipment for decades. For the period 2014-18, India was the second-largest arms importer after Saudi Arabia. According to a report published by Stockholm International Peace Research Institute (SIPRI), “India was the world’s second-largest importer of major arms in 2014–18 and accounted for 9.5% of the global total.” Defence imports sucked a large chunk of India’s foreign exchange and were responsible for severer stress on public finances of the central government.
In the first term, Modi government brought Make in India initiative to promote domestic manufacturing in various sectors including defence. The initiative is producing positive results as the country is set to exceed the target of 35,000 crore rupees export target of defence products. “I expect the exports will surpass the target of Rs 35,000 crore by 2024-25,” said Defence Production Department Secretary Ajay Kumar.
In the last fiscal year, India exported defence products worth 10,700 crore rupees. The government has set a target of 20,000 crore rupees for FY 19-20. In the first three months of the ongoing fiscal, exports worth 5,600 crore rupees were recorded which is more than one-fourth of the targeted export. If the export continues at this pace, the target of 20,000 crore rupees would exceeded. “Defence exports had been growing exponentially. It is like a big rock, which is hard to move, but once it starts rolling, it only gains momentum,” said Ajay Kumar.
The defence exports were only 1,500 crore rupees in 2016-17 and 4,500 crore rupees in 2017-18, surpassed 10,000 crore rupees in 2018-19 and expected to cross 20,000 crore rupees in 2019-20. The exponential growth in the defence sector is due to the government’s encouragement of defence manufacturing under Make in India.
In the second term, the Modi government not only seeks to promote state of the art technological weapons for Indian Armed Forces but also aggressively pushes for exports.
In this budget, 50,000 dollars were allotted to promote export of defence products manufactured in India. Defence attaches (a military expert who is attached to a diplomatic mission) across the world have been asked to submit a detailed action plan to promote Indian defence exports in their respective countries. The countries are categorized as A, B, C according to the prospect for exports and the attaches will get money as per this categorization.
The DPP-2018 aims to invest adequate sources to develop critical technology for manufacturing state-of-the-art military platforms including fighter jets, attack helicopters and weaponry indigenously. According to the draft policy, the government is looking at achieving a turnover of Rs 1.7 trillion (Rs 1, 70,000 crores) in military goods and services by 2025.
The draft aims to raise FDI cap in niche tech to 74 percent. A higher FDI in the sector will boost local manufacturing and catapult India into the League of Nations housing top defence and aerospace industries. The policy aims to make India one of the top five manufacturers of defence platforms with the active participation of public and private sectors.