India is moving to bolster its domestic arms industry, in a move that aims to lessen its dependence on Russian arms imports and at the same time strengthen its ties with like-minded states. The move comes as concerns in New Delhi mount over potential Russian delays and canceled arms deliveries due to the war in Ukraine.
India is a major military power with the world’s second-largest army, fourth-largest air force, and seventh-largest navy. Yet, the country is also one of the world’s largest arms importers, accounting for 11% of global arms orders while importing 70% of its equipment. Sixty percent of India’s arms purchases come from Russia, a legacy of their Cold War-era bond.
Now, Russia’s heavy material losses in Ukraine raise the possibility that some weapons orders may be redirected to replace equipment losses, which could result in lengthy delivery delays. At the same time, sanctions on Russia’s defense industry have raised concerns about the viability of Russia as India’s primary military equipment supplier in the future.
India also imports significant quantities of military materiel from France, Israel and the US, all of which raise concerns about possible political strings attached to its purchases.
Indian Defense Minister Rajnath Singh said on April 7 that India aims to become a major defense manufacturing hub. He also unveiled India’s Third Positive Indigenization List which mentions 101 military items that India aims to produce domestically from 2022-2027. According to Minister Singh, the list shows India’s fast pace of achieving self-sufficiency in its defense sector.
The ambitious list covers big-ticket items such as light tanks, naval utility helicopters, fast attack craft and anti-ship missiles, reflecting the Indian government’s new prioritization of defense indigenization.
Last May, India released its Second Positive Indigenization List, comprising 108 military items such as sensors, simulators, weapons, tank engines, medium-ranged surface to air missile systems, and platforms such as helicopters, corvettes and airborne early warning and control (AEW&C) systems. According to the list, India aims to produce domestically the listed systems from 2021 to 2025.
India released its First Positive Indigenization List in August 2020, which shows the military items India plans to produce indigenously from 2020 to 2022. The list consists not only of simple individual protective equipment but also includes high-end items such as artillery guns, assault rifles, corvettes, sonar systems, transport aircraft, light combat helicopters, radars and wheeled armored fighting vehicles.
For a major military power, India’s defense industry is lopsided vis-à-vis its regional security environment and capability requirements. This, critics say, can be attributed to a lack of support from higher political leadership, meager research & development (R&D) budgets, inefficiencies of the main R&D and manufacturing players, poor management of human resources and a weak acquisition system.
India’s Defense Research and Development Organization (DRDO) is the main state institution in charge of military R&D efforts. However, the institution is saddled with internal contradictions and problems that analysts say have hobbled the development of India’s domestic arms industry.
The classified 2008 Rao Rama report mentions that DRDO’s biggest challenge is attracting, nurturing and retaining talent. The report says 57% of DRDO scientists leave due to professional dissatisfaction, and that 87% of entry-level employees join DRDO believing that the organization will provide greater career opportunities but are disillusioned soon after. Other issues cited in the report include the hiring of average personnel and delays in the hiring process.
DRDO may also have taken up multiple big-ticket items, which in the end become impossible to execute due to human, financial and infrastructure resource constraints. In addition, DRDO projects are often executed without the involvement of end-users at all stages of development, with the notable exception of the Indian Navy.
India thus struggles to attract foreign investment in its defense industries due to these internal and external factors. Protectionism is one of these factors, as India’s 2020 Defense Procurement Procedure forbids Indian companies from bidding as primary vendors in acquisition programs where foreign direct investment (FDI) exceeds 41%.
This means only Indian companies with an equity share of 51% can participate in such programs as principal vendors. As such, foreign defense contractors may be reluctant to invest in Indian defense companies, or even set up a domestic subsidiary.
Moreover, India’s extreme caution regarding national security concerns creates bureaucratic hurdles, especially when it comes to sensitive military technology. At the same time, other states may have their own restrictions when it comes to exporting sensitive military technologies.
While India’s military indigenization plan is no doubt ambitious, it must overcome various political, human, economic and security issues to shift the country from a net arms importer to a future production hub.