The Changing Landscape of Defence Production in India

In 2013 India was the top importer of arms. This dubious distinction stayed for the next five years- accounting for 12% of total global imports by all the countries^[1]. Though China spent three times more than India during this period her import bill was much less than that of India. In 2017 India’s arms imports decreased for the first time since 1991. During the period 2017 to 2021 while China’s dependency on arms imports increased and it overtook India as a bigger arms importer, India’s imports fell from $19432 million to $ 15356 million with a net fall of $4076 million^[2]. Meanwhile India’s exports of arms increased from Rs 1521 crores in 2016-17 to Rs 8434 crores in 2020-21. It had reached Rs 10745 crores in 2018-19. The government plans to export arms worth Rs 35000 crores by 2025^[3].

Interestingly, indigenization in defence production was a national vision for more than seven decades. The political leadership always envisioned India to be self-reliant in defence systems^[4]. The question we need to address here is why was the vision not converted into outcome till 2017? Secondly, what changed in 2017 that we see a sudden spurt in self reliance in almost all defence systems and platforms. For this we look at the events, activities and achievements during these two phases and then arrive at an objective assessment.

Phase 1: The Journey Till 2017

In 1947 India inherited 18 ordnance factories and a few defence-production public sector units. Thus self-reliance in defence production was a very desirable and achievable goal. By 2007 India had established a total of 41 ordnance factories. Added to these were sixteen DPSUs^[5]. This formidable public sector investment in defence production was to achieve self-reliance in acquisition of defence systems. This self-reliance remained a distant dream all through.

In 1962 India found herself woefully short of the most basic defence requirements such as clothing and soldiers, winter protection equipment at high altitude where they were to fight the Chinese invasion. In 1965 as also in 1971 India had to manage with some World War II vintage fighter aircraft (GNATs, Hunters, Mystere, Vampires, Canberra etc.) and Sherman, Centurion, AMX 13 battle tanks against some of the most modern weapon systems the adversary had (Sabre F86, Star Fighter F 104 and Patton Tanks).^[6]

On the financial side the import of weapon systems continued to increase since as early as 1967. In the period 2013 to 2017 India was the top importer of military hard ware. India accounted for 9.5 to 12 percent of total global imports of military systems between this period.^[7]

In terms of organizational efficiency of defence production infrastructure, it was characterized by -inefficiencies, delays, neglect, lack of direction and decision paralysis. As per Laxman Behera of IDSA the productivity of Indian defence production infrastructure in 2016 was about 4.5 times lower than their leading international counterparts. The Light Combat Aircraft (LCA) project that was announced in 1983 did not have a project officer (who was to be provided by the IAF) till as late as 1999. The CAG commenting on the India’s Main Battle Tank (Arjun) Project observed that the user (Army) had given much more stringent qualitative requirements for Arjun compared to what they gave for the foreign tank (Russian T90) as if to favour import against indigenous procurement.^[8]

Indian economy was liberalized in 1991. In 2011 the political leadership decided to liberalize defence production infrastructure also by involving the private sector. Share of private sector in defence production commenced rising from 2015-16 only^[9].

Phase 2: The Turning Point-Post 2017

Post 2017 import commenced decreasing. India conducted two small but very effective operations against Pakistan – surgical strike in Uri sector and air strike in Balakot in Pakistan with modern weapon systems as good if not better than the adversary. Against China, India could deploy around 50,000 troops equipped with modern weapon systems and more than adequate logistic support- winter clothing and living accommodation, road infrastructure with supply back up.

For the first time since independence India inducted big ticket indigenous weapon platforms and systems to include medium guns, radars and surveillance systems, battle tanks, rifles, night vision devices, fighter aircraft, combat helicopters, trucks, armoured personnel carriers and so on.
The private sector contribution in defence sector has been increasing every year^[10]. The preferential treatment given to public sector undertakings was removed. Instead, the public sector undertakings commenced hand holding and assisting the private sector enterprises in manufacturing some of the most complex defence systems. The 41 ordnance factories were merged into seven Defence Production Public Sector Units- thus doing away with a 246 years old legacy- the main cause of inefficiency and delays^[11].

The role of Medium and Small Enterprises (MSMEs) was recognized. The three services became facilitators in letting the MSMEs and industry in general know what they actually wanted. The MSMEs were encouraged to get in touch with the end users to understand the finer aspects of the products they wanted. The government earmarked 25 percent of the Research and Development funds for the industries. Portals like IDex (innovation in defence excellence) and Srijan- (one stop portal for getting to know the defence sector requirements) were hosted for the prospective vendors. Meanwhile the structure, growth path and payment gateways for the small industries and start ups were digitally networked and formalized. ^[12]

Induction of Tejas into IAF provides an interesting case study when contrasted with earlier attempt to induct HF 24 -Marut. To start with CAG found many shortcomings in the Light Combat Aircraft (LCA) project culminating in production of Tejas. However, ignoring the CAG audit report, Tejas Mk I aircrafts were inducted in service.^[13] The Government announced ambitious plans to replace all the Mig 21s, 29s, Jaguars, Mirage 2000s with Tejas Mk II in near future. In addition, India would be developing its own fifth generation fighter aircraft. A number of countries have shown interest in buying Tejas from India^[14]. In 2022 the IAF ranked third on world air power index in terms of fighting strength behind the US, Russia and ahead of the Chinese air power^[15].

Compare this with the HF 24 programme some six decades back. Envisioned in 1960s, test flown by the IAF in 1967, took part in 1971 war with Pakistan, shot down a Pakistani F86 Sabre on 7 December 1971, three pilots flying HF 24 in this war were awarded Veer Chakra. The aircraft was shelved soon after!!^[16]Then began a steam of imported fighter aircrafts from all over the world.

On overall indigenization front the Indian Defence Minister, said that 68% of the capital budget for defence is reserved for indigenous defence production.^[17] The Defence Research and Development Organization (DRDO) has set up centers of excellence for young scientists^[18]. A total of 37 projects have been awarded to various industries mainly in the MSME sector. Government plans to fund at least 250 start-ups in the defence sector^[19]. The Prime Minister commissioned India’s indigenously developed and built air craft carrier Vikrant – with a new Indian Navy Flag dedicated to the memory of The Great Chhatrapati Shivaji^[20]. This ship is almost one and a half times in size compared to the earlier Vikrant. This is the biggest ship India has built so far. Net import content that was 41.81 percent in 2018-19 has come down to 36 percent in 2020-21^[21]. This is closer to ‘not more than 30 percent import’ envisioned in 1947.

Assessment

The national vision for self-reliance and lofty goals (producing systems like the HF 24 with envisioned speed of Mach 2, more than 70 percent indigenous component in military systems) envisaged by the leadership in 1947 were really commendable. Translating this vision into desired outcomes had required appropriate strategy and an operational cultural of stretching the resources to optimal levels. Unfortunately, this is what we lacked for most of the post-independence era. We can look at some specific examples.

First, self-reliance especially in modern weapon systems requires concerted research and development in modern technology that entails resilient economy. Against this requirement of rapid economic growth India continued to become poorer for the first three decades after independence^[22]. With this record of economic growth, it was difficult to support the lofty mission.

Secondly, for achieving such an ambitious mission ‘all-of -the-nation’ would have been the best approach. Instead, India continued to rely on the socialist doctrine of ‘commanding heights’ expected to create wealth for the nation. The public sector enterprises (the commanding heights) continued to suck in six to nine percent of national GDP for more than four and half decades^[23].

Thirdly, even after liberalization in 1991, we lacked a truly collaborative approach in pursuing our national vision. The silos of defence production were kept tightly insulated from the private sector. Hence the mammoth and well-established defence production infrastructure remained highly inefficient and starved of latest managerial skills, technological talents and academic research.

Fourthly, India as a nation lacked the self-belief to withstand domestic and international pressures. It took many years to do away with an archaic ordnance board. It is only recently that we have learnt to assert ourselves as a nation. Of-course there will be additional (though hidden) costs attached for this approach.

Conclusion

With the defence sector import content reduced to the historical low of 36 percent in 2020-21, India is within easy reach of her stated vision of self-reliance in this sector. This achievement has been and will continue to be a function of matching capabilities in a large number of other domains linked with nation building. First, the Indian economy will have to grow at a fast pace both in terms of GDP and GDP per capita. Second, this growth trajectory needs to be dominated by efficiency and innovation driven activities. Third, our defence sector enterprises (both public as well as private) need to become globally competitive. As of 2022 India has just two companies (HAL and BEL) in the top 100 global defence manufacturing companies. The US has 48 companies on this list, China has seven. Russia is not included in this survey since they did not respond. None of the Indian private sector defence production companies (Tata, Reliance, Adani, Mahindra, Larsen Toubro, Kalyani etc.) are on this list^[24].

In addition, India needs to invest heavily in a number of dual use technologies (used for weapon systems as well as other wealth creating industries). The semi-conductor manufacturing hub coming up in Gujarat (Vedanta and Foxcon joint venture) is one such giant step in the right direction^[25]. The finished products from this hub will not only fuel consumer electronics business but will find place in weapon platforms and systems. In essence we need to soon jettison our tag of third world developing country and emerge as a developed nation with per capita GDP almost five times compared to what we have today and gross GDP that makes us third largest economy in the world.

End Notes

^[1]https://timesofindia.indiatimes.com/india/with-12-of-global-imports-india-tops-list-of-arms-buyers-report/articleshow/63276648.cms(Accessed 7 September 22)
^[2]https://www.thehindu.com/data/data-india-reduced-arms-imports-from-russia-while-chinas-dependency-increased/article65248748.ece ((Accessed 7 September 22)
^[3]https://www.thehindu.com/news/national/the-growth-of-indias-defence-exports/article37966675.ece ((Accessed 7 September 22)
^[4]Behera Laxman Kumar ‘Indian Defense Industry An Agenda for Making in India’ Institute of Defense Studies and Analysis (New Delhi) Publication Pentagon Press 2016. ISBN 978-81-8274-905-4.
^[5]https://www.fortuneindia.com/enterprise/indias-41-ordnance-factories-now-history-merge-into-7-dpsus/106275((Accessed 10 September 22)
^[6]Air Marshal Anil Chopra, Dr. Shalini Chawla (Editors) The 1971 Indo Pak War Reflections and Projections KW Publishers Pvt Ltd, New Delhi in association with Center for Air Power Studies 2021 ISBN 9789391490096
^[7]https://data.worldbank.org/indicator/MS.MIL.MPRT.KD?locations=IN(Accessed 10 September 22)
^[8]Ibid 4
^[9]https://dras.in/the-defence-modernisation-role-of-private-sector/Ibid 4( (Accessed 10 September 22)
^[10]https://www.livemint.com/news/india/private-defence-business-gets-one-more-nudge-11601460654397.html(Accessed 11September 22)
^[11]https://www.news18.com/news/india/defence-diary-7-firms-born-out-of-ordnance-factory-board-need-new-reforms-talent-in-transition-phase-4800638.html(Accessed 10 September 22)
^[12]https://pib.gov.in/PressReleasePage.aspx?PRID=1782604#:~:text=The%20scheme%20was%20launched%20in,and%20Startups%20under%20TDF%20scheme.(Accessed 10 September 22)
^[13]https://timesofindia.indiatimes.com/india/cabinet-committee-on-security-approves-tejas-2-0-mega-project/articleshow/93914219.cms(Accessed 10 September 22)
^[14]https://www.india.com/news/india/iaf-to-form-6-squadrons-of-tejas-mark-2-will-be-much-more-sophisticated-equipped-with-state-of-the-art-features-5521395/(Accessed 12September 22)
^[15]https://currentaffairs.adda247.com/indian-air-force-ranks-third-on-world/#:~:text=Indian%20Air%20Force,Indian%20Air%20Force%20Ranks%20Third%20on%20WDMMA,the%20Global%20Air%20Power%20Rankings (Accessed 12September 22
^[16]https://www.hindustantimes.com/india-news/60-years-of-marut-a-fighter-jet-that-proved-its-worth-in-1971-war-101624129770008.htmlAccessed 12September 22
^[17]https://www.business-standard.com/budget/article/budget-2022-68-capex-for-defence-set-aside-for-domestic-procurement-122020100956_1.htmlAccessed 12September 22
^[18]https://www.pib.gov.in/PressReleasePage.aspx?PRID=1848675Accessed 12September 22
^[19]https://pib.gov.in/PressReleasePage.aspx?PRID=1782604Accessed 12September 22
^[20]https://www.outlookindia.com/national/pm-narendra-modi-commissions-ins-vikrant-into-indian-navy-photos-220777?photo-6Accessed 15 September 22
^[21]https://economictimes.indiatimes.com/news/defence/percentage-of-capital-expenditure-on-import-by-armed-forces-on-decline-in-last-3-yrs-govt-data/articleshow/93217994.cms?from=mdrAccessed 12September 22
^[22]India from 1952 to 1976 and 2014 to 2021 Two Periods of Political Stability : A Comparative Analysishttps://www.vifindia.org/article/2022/january/05/India-1952-1976-and-2014-2021( Accessed 17 September 22)
^[22]Ashok Pathak’ India’s Strategies for Information War and Cyber Deterrence’ Vitasta Publication Private Ltd New Delhi , 2020, ISBN 9789386473875
^[23]https://www.defensenews.com/top-100/2022/08/08/indias-private-defense-firms-seek-level-playing-field-as-mod-preps-new-arms-embargo/Accessed 12September 22
^[25]https://www.business-standard.com/article/companies/vedanta-foxconn-sees-guj-semiconductor-plant-reaching-break-even-in-5-yrs-122091300546_1.htmlAccessed 12September 22

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