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Defence matters, like foreign policy matters, seldom become election issues. Therefore, it was pleasantly surprising when the issue of making India an arms exporter in next five years cropped up recently. Import substitution and weapons export have always been an issue in independent India. However, given the endemic impasse in India’s domestic military–industrial complex (MIC) and its overt dependence on foreign weapons, such election promises may engender new expectations but defy ground realities.
The promise of making India an arms exporter brings home the larger malaise in the Indian political discourse, i.e. the disinclination to discuss security issues from a dispassionate perspective. Expansion of the MIC has been part of this problem. India simply failed to build on the nascent MIC that it inherited from the British Raj. Piecemeal expansions and capacity building was resorted to only during crisis times. India has been importing almost 70 percent of its weaponry for the last six decades. In a tragic twist of tale, India has emerged as the largest arms importer since 2011 with a 109 percent lead over China, its archrival and second largest importer. In addition, while China has also emerged as the fifth largest arms exporter overtaking UK in 2013, India remains a distant 26th. With 12 percent of global weapons import, India has single handedly revived the sick arms industry of Russia and UK and created jobs in other foreign MICs while depriving the much-required spur to drive the domestic MIC. While the global arms companies are euphoric about India’s market potential, India’s ‘consistent and persistent dependency’ belies its great power status. As things stand, India simply does not have the inbuilt structural capacity to become an arms exporter in next five years. According to a Deloitte and CII estimate, ‘the Indian arms industry would need to double its production output every year for five years’. This is indeed a very difficult task.
One of the main reasons for this stalemate is the mainstream political parties’ shyness in biting the bullet and forge a consensus on a comprehensive reforms package for expanding the MIC. When the economic reforms were unleashed in early 1990s, the defence production sector was left untouched from ‘de-licensing’ since it was considered ‘sensitive’ subject. In the process, the country paid the price for treating defence production as a ‘holy cow’ in the Kargil War when there was a demand supply mismatch in spare parts and ancillary products. Learning from the bitter experience, the then NDA Government opened up the defence production for private sector in 2001; the UPA Government subsequently pitched in through an offset policy in 2005 and a defence production policy in 2011 apart from streamlining procurement guidelines. However, several reform proposals have run into problems due to lack of political consensus. First, the Government could not implement the Kelkar Committee recommendations on the corporatisation of ordnance factories due to opposition from various stakeholders. The domestic MIC is certain to benefit if these reforms become a reality. Second, FDI remains a controversial issue. As per Government’s own estimate, half of the domestically produced equipment is obsolete and only 15 percent is considered as state-of-the art. Lack of FDI also explains why India remains a producer of tier II or III weapons. The present cap of 26 percent is insufficient to bring in foreign investment, desired technology and manufacturing capabilities. The private sector suggestion for lifting this to at least 49 percent is yet to receive support across the political spectrum. Third, the ideological divide on defence–development correlation, often reflected through the polemics on defence budget share in national GDP, is also responsible for low domestic arms production. The protagonists of higher defence budget allocation have cared little to ensure the development of a domestic manufacturing base and instead have clamoured, rather openly, for imported defence weaponry. While the Prime Minister has been speaking of ‘inclusive growth’ for quite some time, there has been little political debate on this model to suggest how defence sector can contribute to the nation’s growth story.
Lack of political consensus apart, the ground situation is not fertile enough to promote the domestic MIC. Major business groups have made little use of the liberalised environment to invest in defence R & D and production. Trade associations like CII and FICCI have done little beyond rhetoric and commissioning sample studies. Hitherto, India’s manufacturing base is poor, outdated and not up to contemporary technological expectations. With little prospects for rapid economic growth in near future, doubts remain if this sector would come out of slumber and take steps to aid and expand the defence industrial base. India, therefore, cannot become a lead arms exporter in near future. However, it does have the necessary potential to reduce a healthy proportion of weapons import. That cannot be done through a blanket ‘great leap forward’ approach; instead, a calibrated and considered action plan has to be put in place. Probably, there is a lesson to be learnt from the Chinese experience!
India as an Arms Exporter: Election Rhetoric or a Possible Reality?
The promise of making India an arms exporter brings home the larger malaise in the Indian political discourse, i.e. the disinclination to discuss security issues from a dispassionate perspective. Expansion of the MIC has been part of this problem. India simply failed to build on the nascent MIC that it inherited from the British Raj. Piecemeal expansions and capacity building was resorted to only during crisis times. India has been importing almost 70 percent of its weaponry for the last six decades. In a tragic twist of tale, India has emerged as the largest arms importer since 2011 with a 109 percent lead over China, its archrival and second largest importer. In addition, while China has also emerged as the fifth largest arms exporter overtaking UK in 2013, India remains a distant 26th. With 12 percent of global weapons import, India has single handedly revived the sick arms industry of Russia and UK and created jobs in other foreign MICs while depriving the much-required spur to drive the domestic MIC. While the global arms companies are euphoric about India’s market potential, India’s ‘consistent and persistent dependency’ belies its great power status. As things stand, India simply does not have the inbuilt structural capacity to become an arms exporter in next five years. According to a Deloitte and CII estimate, ‘the Indian arms industry would need to double its production output every year for five years’. This is indeed a very difficult task.
One of the main reasons for this stalemate is the mainstream political parties’ shyness in biting the bullet and forge a consensus on a comprehensive reforms package for expanding the MIC. When the economic reforms were unleashed in early 1990s, the defence production sector was left untouched from ‘de-licensing’ since it was considered ‘sensitive’ subject. In the process, the country paid the price for treating defence production as a ‘holy cow’ in the Kargil War when there was a demand supply mismatch in spare parts and ancillary products. Learning from the bitter experience, the then NDA Government opened up the defence production for private sector in 2001; the UPA Government subsequently pitched in through an offset policy in 2005 and a defence production policy in 2011 apart from streamlining procurement guidelines. However, several reform proposals have run into problems due to lack of political consensus. First, the Government could not implement the Kelkar Committee recommendations on the corporatisation of ordnance factories due to opposition from various stakeholders. The domestic MIC is certain to benefit if these reforms become a reality. Second, FDI remains a controversial issue. As per Government’s own estimate, half of the domestically produced equipment is obsolete and only 15 percent is considered as state-of-the art. Lack of FDI also explains why India remains a producer of tier II or III weapons. The present cap of 26 percent is insufficient to bring in foreign investment, desired technology and manufacturing capabilities. The private sector suggestion for lifting this to at least 49 percent is yet to receive support across the political spectrum. Third, the ideological divide on defence–development correlation, often reflected through the polemics on defence budget share in national GDP, is also responsible for low domestic arms production. The protagonists of higher defence budget allocation have cared little to ensure the development of a domestic manufacturing base and instead have clamoured, rather openly, for imported defence weaponry. While the Prime Minister has been speaking of ‘inclusive growth’ for quite some time, there has been little political debate on this model to suggest how defence sector can contribute to the nation’s growth story.
Lack of political consensus apart, the ground situation is not fertile enough to promote the domestic MIC. Major business groups have made little use of the liberalised environment to invest in defence R & D and production. Trade associations like CII and FICCI have done little beyond rhetoric and commissioning sample studies. Hitherto, India’s manufacturing base is poor, outdated and not up to contemporary technological expectations. With little prospects for rapid economic growth in near future, doubts remain if this sector would come out of slumber and take steps to aid and expand the defence industrial base. India, therefore, cannot become a lead arms exporter in near future. However, it does have the necessary potential to reduce a healthy proportion of weapons import. That cannot be done through a blanket ‘great leap forward’ approach; instead, a calibrated and considered action plan has to be put in place. Probably, there is a lesson to be learnt from the Chinese experience!
India as an Arms Exporter: Election Rhetoric or a Possible Reality?
) we first have to look to satisfy the demands of our own military, paramilitary and police forces, only then we can think about selling them to others. 
