OPINION:
India’s reliance on imports may well continue even as it seeks to develop an indigenous military industry.
India has emerged as the largest arms importer in the world, and is poised to spend an estimated $310 billion by 2022. Both domestic and international arms dealers are lining up for some of her business.
Defense Minister Manohar Parrikar in March unveiled India’s plans before a gathering that included 224 representatives from 48 countries and 1,055 defense-related companies. While India hopes to develop a domestic arms industry to serve more of her defense needs, she will still be spending a good deal abroad as the country upgrades her capabilities in an increasingly dangerous part of the world.
The Stockholm International Peace Research Institute rates India the planet’s largest importer of arms, with a 14 percent share in global arms imports between 2011 and 2015. India’s mobilization has been driven by concerns about the critical gaps in the tactical and strategic defenses of its armed forces, which have hitherto been largely served by vintage Soviet-era equipment. Another worry has been the concerted expansion of the offensive capabilities of both Pakistan and China on India’s frontiers.
Three “Made in India” defense contracts worth $3.7 billion were awarded last May. One was worth $2 billion for joint production of 56 C-295 transport aircraft by Airbus and Tata Advanced Systems with options for eight more. Meanwhile, the United Kingdom’s BAE Systems is partnering with Mahindra Defense Systems on a $700 million contract for local production of howitzers for the Indian Army and a joint venture between Russia’s Rostec State Corp., and Hindustan Aeronautics Ltd. will license-build 200 Ka-226T twin-engine light multipurpose helicopters in a deal worth $1 billion.
These partnerships are designed to offset the fact that in the past, 70 percent of India’s defense spending has been spent abroad.
While India’s dependence on defense imports seems likely to continue in the foreseeable future, Prime Minister Narendra Modi wants the country to become a major arms exporter as well as an importer. He is hoping to sell $3 billion worth of Indian-produced arms internationally within a decade. This would represent a huge turnaround as Indian arms sales abroad have amounted to only $245 million over the past three years.
The Tata Group is among several major Indian companies positioning themselves to take advantage of the military bounty. India’s largest private-sector conglomerate with $108.8 billion revenue in 2014-15 is investing substantially in this field. Tata is setting up a new factory in Karnataka, which will open next year, and is hoping to increase its defense-related income from 3 percent of total revenue now to 15 percent as it pursues more defense-related business.
L&T, the nation’s $9.22 billion turnover engineering and construction giant, is looking to win army and navy construction contracts worth $18-20 billion and is India’s only company with licenses to manufacture defense equipment for all four services, including the Coast Guard. The company fabricated the hull and other critical components of India’s first indigenous nuclear-powered submarine, Arihant, and has invested $594 million in the 1,225-acre Kutapalli shipyard on the east coast where it intends to build submarines — if it wins the imminent contract estimated at between $8-10 billion.
The Indian Navy has a particularly robust program of modernization, with 41 ships on order from Indian yards at a combined cost of about $16 billion).
Last September, India signed a $2.5 billion deal with Boeing for 22 Apache AH-64E combat and 15 Chinook CH-47F heavy lift helicopters. With large sections of the Chinook fuselage already being made in India, Boeing Chairman Jim McNerney said his company may assemble either of these helicopters in India and also proposed to manufacture a Boeing fighter jet in the country.
Russia has been India’s major international supplier since the Soviet era, accounting for 70 percent of India’s arms imports between 2011 and 2015. Russia is expected to remain India’s main arms supplier for the foreseeable future, but for the first time faces significant domestic and international competition for India’s business.
There is a growing view that India needs to adequately militarize in the context of the threat scenario it confronts on two fronts. Apart from defense modernization and the development of its domestic capabilities, it needs to focus on future technologies like stealth, unmanned systems, satellite surveillance and cyberwarfare.
China, seen by many in India and elsewhere as her most problematic neighbor, is a generation ahead of India and the gap is increasing. China is also Pakistan’s major supplier, and India feels the need to keep pace with whatever Beijing may be supplying to that nation. Beijing has successfully developed her own capabilities after decades of dependence on Soviet imports and reverse engineering, and India’s leaders are committed to developing the capacity to defend their country in the decades ahead.
• Sarosh Bana is executive editor of Business India.
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