From UPSC perspective, the following things are important :
Prelims level : Not much
Mains level : Defence manufacturing in India
India’s defense exports have increased manifold from ₹1,521 crore in 2016-17 to ₹8,434.84 crore in 2020-21.
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India’s defense exports
- India has the strength of low-cost, high-quality production.
- The Government has set an ambitious target to achieve exports of about ₹35,000 crore ($5 billion) in aerospace and defense goods and services by 2025.
- The Defense Ministry has clarified that the names of the major defense items exported cannot be disclosed due to strategic reasons.
- To boost indigenous manufacturing, the govt had issued two “positive indigenization lists” consisting of 209 items that cannot be imported and can only be procured from domestic industry.
A significant achievement
- According to the latest report of the Swedish think tank Stockholm International Peace Research Institute (SIPRI), three Indian companies figure among the top 100 defence companies in the 2020 rankings.
- These include Hindustan Aeronautics Limited (HAL), Ordnance Factory Board and Bharat Electronics Ltd (BEL).
Yet India is a top importer
- While India remained among the top importers, it was also included in the Top 25 defence exporters.
- There was an overall drop in India’s arms imports between 2011-15 and 2016-20, according to another SIPRI report of 2020.
Items that India export
- India has supplied different types of missile systems, LCA/helicopters, multi-purpose light transport aircraft, warships and patrol vessels etc.
- It is also willing to export artillery gun systems, tanks, radars, military vehicles, electronic warfare systems and other weapons systems to IOR nations.
Major partners: South Asian Countries
- Vietnam is procuring 12 Fast Attack Craft under a $100 million credit line announced by India.
- It is also interested in Advanced Light Helicopters and Akash surface-to-air missiles.
- HAL has pitched its helicopters and the Tejas LCA to several Southeast Asian and West Asian nations and is in the race to supply the LCA to Malaysia.
- Discussions on the sale of BrahMos supersonic cruise missiles, jointly developed by India and Russia, are at an advanced stage with some Southeast Asian nations.
Steps taken by the Centre to boost defence production
- Licensing relaxation: Measures announced to boost exports since 2014 include simplified defence industrial licensing, relaxation of export controls and grant of no-objection certificates.
- Lines of Credit: Specific incentives were introduced under the foreign trade policy and the Ministry of External Affairs has facilitated Lines of Credit for countries to import defence product.
- Policy boost: The Defence Ministry has also issued a draft Defence Production & Export Promotion Policy 2020.
- Indigenization lists: On the domestic front, to boost indigenous manufacturing, the Government had issued two “positive indigenization lists” consisting of 209 items that cannot be imported.
- Budgetary allocation: In addition, a percentage of the capital outlay of the defence budget has been reserved for procurement from domestic industry.
Issues retarding defence exports
- Excess reliance on Public Sector: India has four companies (Indian ordnance factories, Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL) and Bharat Dynamics Limited (BDL)) among the top 100 biggest arms producers of the world.
- Policy delays: In the past few years, the government has approved over 200 defence acquisition worth Rs 4 trillion, but most are still in relatively early stages of processing.
- Lack of Critical Technologies: Poor design capability in critical technologies, inadequate investment in R&D and the inability to manufacture major subsystems and components hamper the indigenous manufacturing.
- Long gestation: The creation of a manufacturing base is capital and technology-intensive and has a long gestation period. By that time newer technologies make products outdated.
- ‘Unease’ in doing business: An issue related to stringent labour laws, compliance burden and lack of skills, affects the development of indigenous manufacturing in defence.
- Multiple jurisdictions: Overlapping jurisdiction of the Ministry of Defence and Ministry of Industrial Promotion impair India’s capability of defence manufacturing.
- Lack of quality: The higher indigenization in few cases is largely attributed to the low-end technology.
- FDI Policy: The earlier FDI limit of 49% was not enough to enthuse global manufacturing houses to set up bases in India.
- R&D Lacunae: A lip service to technology funding by making token allocations is an adequate commentary on our lack of seriousness in the area of Research and Development.
- Lack of skills: There is a lack of engineering and research capability in our institutions. It again leads us back to the need for a stronger industry-academia interface.
- Reducing import dependence: India was the world’s second-largest arms importer from 2014-18, ceding the long-held tag as the largest importer to Saudi Arabia, says 2019 SIPRI report.
- Security Imperative: Indigenization in defence is critical to national security also. It keeps intact the technological expertise and encourages spin-off technologies and innovation that often stem from it.
- Economic boost: Indigenization in defence can help create a large industry which also includes small manufacturers.
- Employment generation: Defence manufacturing will lead to the generation of satellites industries that in turn will pave the way for a generation of employment opportunities.