Defence industry of India

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The Defence industry of India is a strategically important sector in India.[1] With a strength of over 1.44 million active personnel, it is the world's 2nd largest military force after People's Republic of China. India has the world's largest volunteer military of over 5.1 million personnel. The total budget sanctioned for the Indian military for the financial year 2019 is $60.9 billion.[2][3][4]

"Defence Production Policy of 2018" (DPrP-2018) has a goal of becoming among the top 5 global producers of the aerospace and defence manufacturing with annual export target of US$5 billion by 2025.[5] Despite having a modest internal defence industry, India is the largest arms importer in the world, with most of its high-tech, high-value equipment such as aircraft, ships, submarines, missiles, etc. coming in from Russia.[6] 12% of worldwide arms exports (by value) reach India.[7] India domestically produces only 45% to 50% of defence products it uses, and the rest are imported.[8] India's military–industrial complex has had little success and only recently private sector was allowed to enter the defence production.[9] India's defence exports were INR 4,682 crore (US$0.66 billion) in 2017–2018 and INR10,500 crore (US$1.47 billion) in 2018–2019, of 2018–2019 exports India's 8 Defence Public Sector Undertakings (DPSU) and 41 Ordnance Factories (OF) contributed INR800 crore (7.6% of total defence exports).[5]

Military budget[edit]

The military budget of India is about 1.49% for year 2018–19 of the total GDP.[10] However, it spends nearly an equal amount in importing arms from other countries.

Its defence expenditure for the 2017–18 fiscal year, based on allottments by its Ministry of Finance was 86,488 crores for Defence capital and 296,000 crores for defence pensions.[11]

Service/ department-wise allocation as a percentage of total defence estimates in 2017–18:

  • Army: 55.9%
  • Air Force: 22.5%
  • Navy: 14.6%
  • DRDO: 5.7%
  • DGOF: 0.8%
  • DGQA: 0.5%

The Indian Army accounts for more than half of the total defence budget of India, with most of expenditure going to the maintenance of cantonments, salaries and pensions, instead of critical arms and ammunition.[12][13] As of 2019, there is 25% shortfall in the military's budget demand versus the actually budget allocation by the government.[9] There are suggestion to use the military's land bank to generate more funds to bridge this gap for the modernisation of military with the latest equipment.[9] From November 2019, government exempted the imported defence equipment from the customs and import duties for a period of five year during which domestic production is unlikely to meet the technical demand of the forces.[14] This will result in a savings of INR25,000 crore (US$3.5 billion) which could be used for the modernisation of the forces.[14]

State orders[edit]

India has been pushing for greater indigenisation of military hardware as India imports around 70 percent (by value) of its high-tech defence hardware such as aircraft, ships, submarines, missiles etc. mainly from Russia, Japan, Israel and United States.[15]

Compared to other branches of military, the Indian Army consumes 50% of defence budget, is least technology intensive and slowest to adopt the indigenisation of equipment, has multi-year long procurement cycle, and pre-purchase field trials last for several years sometimes without resulting in any procurement, for example soldier's hand held GPS enabled indigenous "Sathi" PDA "Beta Project" was abandoned midway and soldiers still do not have a PDA.[16] To expedite the development cycle of new technologies and to better fit the end user requirements, army has asked DRDO to take more army staff on deputation to be part of DRDO technology development project teams.[17]

Indian forces are using numerous successful indigenous technologies produced by the DRDO, including Varunastra, Maareech, Ushus, TAL by navy; Electronic Warfare Technologies, radars, composite materials for LCA, AEW&C, Astra, LCA Tejas by airforce; and ASAT, BrahMos, ASTRA, Nag missile, SAAW, Arjun MBT Mk 1A, 46 metre Modular Bridge, MPR, LLTR Ashwin by the army.[18]

Arms Exports[edit]

India's track record as an arms exporter has been modest due to export restrictions on the manufacturing organisations like OFB.[19][20] OFB exports Arms and Ammunition, Weapon Spares, Chemicals & Explosives, Parachutes, Leather and Clothing items to more than 30 countries worldwide e.g. Thailand, Malaysia, Indonesia, Sri Lanka, Bangladesh, Germany, Belgium, Turkey, Egypt, Oman, Israel, Kenya, Nigeria, Botswana, Chile, Suriname and USA.[21][22]

In March 2011 New Delhi agreed to sell its first indigenously designed and built multi-role offshore patrol vessel (OPV) named Barracuda, to Mauritius. In March 2017, India finalised a deal with Myanmar for sale of indigenously developed lightweight torpedoes worth US$37.9 million. Similar naval platforms were sold to Sri Lanka and Vietnam as well.[23]

In Sep 2017, Ordnance Factory Board (OFB) secured its biggest export order from UAE for the supply of 40,000 numbers of 155 mm artillery shells for Rs 322 crore.[24] In Aug 2019, OFB received a second order from UAE to supply another 50,000 artillery shells.[25]

Organisations[edit]

State-Run[edit]

Name Specialization Revenue (As of 2015, except DRDO) Employees (As of 2015) Notes
Bharat Dynamics Ammunition and Missile systems INR 3281 crores (US$470 million) 3,183 [26]
Bharat Electronics Avionics INR 7093 crores (US$1.0 billion) 9,952 [27]
Bharat Earth Movers Transport INR 2978 crores (US$410 million) 7,722 [28]
Defence Research and Development Organisation Research and Development Annual Budget of 2018–19 of INR 17861 crores (US$2.6 billion) 30,000 [29]
Garden Reach Shipbuilders & Engineers Naval ships INR 1694 crores (US$250 million) 3,133 [30][31]
Goa Shipyard Shipbuilding INR 681 crores (US$99 million) [32][33]
Hindustan Aeronautics Limited Aerospace manufacturer INR 17753 crores (US$2.6 billion) 32,108 [34]
Mazagon Dock Limited Shipbuilding INR 4399.16 crores (US$640 million) 9,000 [35][36]
Mishra Dhatu Nigam Metallurgy INR 747 crores (US$110 million) 852 [37][38][39]
Ordnance Factory Board Defence Equipment and Support INR 23687.22 crores (US$3.5 billion) 84,000 [40][41]
Cochin Shipyard Limited Shipbuilding INR 25.44 billion (2017–2018, US$370 million) 12000

Private companies[edit]

Following have been given defence manufacturing license (please help expand this partial list):

Other related[edit]

Domestic of defence manufacturing[edit]

Indigenisation[edit]

In September 2019, DRDO formulated the "DRDO Policy and Procedures for Transfer of Technology" and released information on "DRDO-Industry Partnership: Synergy and Growth and DRDO Products with Potential for Export".[18] During the Vibrant Goa Global Expo and Summit 2019 in October, DRDO signed technology transfer contracts with 16 Indian companies, including

3 startups, to produce products for the use by Indian Armed Forces.[43] This included high self life, high nutrition, ready-to-eat on-the-go food products to be consumed in the difficult terrain and bad weather.[43] To boost the domestic defence production capability, Defence Minister Rajnath Singh's November 2019 delegation included 50 Indian companies scouting for the Russian partners and joint ventures for the defence production in India.[44] DRDO and ISRO have agreed to collaborate in India's crewed orbital spacecraft project called Gaganyaan during which DRDOs various laboratories will tailor their defence capabilities to suit the needs of ISRO's human space mission.[42] To become technology research and production leader, reduce reliance on the imports and increase self-reliance, DRDO Chief called for more collaboration with the industry, private sector, research and education institutes including IITs and NITs.[8]

Make in India[edit]

The Modi government in its first year cleared 39 capital procurement proposals, of which 32 proposals worth 889 billion (US$12 billion) (or 96% of value of total proposals) were categorized as Buy (Indian) and Buy and Make (Indian)—the top two prioritized domestic industry-centric procurement categories as per the defence procurement procedure (DPP).[45]

In July 2015, the defence ministry eased export regulations and stopped demanding multiple assurances on end-use from foreign governments even for sale of components by Indian entities.[46]

Instead of encouraging the manufacturing of equipment in India, the Modi government has given financial powers to the Armed forces to purchase equipment up to INR 500 crores without the consultation of the Ministry.[47][48] This will further increase the types of weapons, their spares and components, cost of maintainability which will result in non-compatibility and standardisation problems in near future.

FDI in Defence[edit]

Even though Modi government has been trying hard to get FDI in defence sector by first raising the cap from 26% to 49% through automatic route and 100% through MoD's approval, whereby the investing foreign entity can have ownership up to 100% in the defence manufacturing, it has received a dismal response with a meagre investment of just US$0.08 million (INR 56 lacs) in 2014–15, US$0.10 million (INR 71 lac) in 2015–16, US$0.01 million (INR 7 lacs) in 2017–18 and US$2.18 million (INR 15 crores) during 2018–19.[49]

Year Total FDI in Defence
2014–15 USD 0.08 million (INR 56 lacs)
2015–16 USD 0.10 million (INR 71 lac)
2017–18 USD 0.01 million (INR 7 lacs)
2018–19 USD 2.18 million (INR 15 crores) [49]

See also[edit]

References[edit]

  1. ^ "The seven homegrown firms fighting over India's $620 billion defence market". Quartz. Retrieved 12 November 2015.
  2. ^ IISS (17 January 2018). The Military Balance 2009. doi:10.4324/9781351225946. ISBN 9781351225946.
  3. ^ "29 Largest Armies In The World". WorldAtlas. Retrieved 5 September 2019.
  4. ^ Das, Shaswati (5 July 2019). "Sitharaman keeps defence sector outlay unchanged in budget 2019". Mint. Retrieved 5 September 2019.
  5. ^ a b India plans to be among top 5 defence producers, Conrad Courier, 5 November 2019.
  6. ^ "Nearly half of US arms exports go to the Middle East". Guardian. 12 March 2018. Retrieved 16 October 2018.
  7. ^ "Trends in international arms transfers 2017". sipri.org. SIPRI. Retrieved 16 October 2018.
  8. ^ a b DRDO chief urges for indigenous defence production, The Economic Times, 28 September 2019.
  9. ^ a b c Why unlocking defence land bank to meet military's needs isn't a bad idea, The Economic Times, 4 November 2019.
  10. ^ "Military budget of India 2018". idsa.in. IDSA. Retrieved 16 October 2018.
  11. ^ Rajya Sabha TV (1 February 2017), FULL SPEECH: Finance Minister Arun Jaitley's Budget Speech | Union Budget 2017–18, retrieved 1 February 2017
  12. ^ "Defence Manufacturing".
  13. ^ https://deepweb.to/?/web/20190103071510/https://www.investindia.gov.in/sector/defence-manufacturing
  14. ^ a b Customs, GST relief to give Rs 60,000-cr boost to defence, The Economic Times, 2 November 2019.
  15. ^ "Arms race: India approves defence procurements worth $3.5 bn, says report – The Express Tribune". The Express Tribune. Retrieved 12 November 2015.
  16. ^ Why the army's changed mindset on indigenous technology is a relief, India Today, 21 October 2019.
  17. ^ NEWS Army wants DRDO to take in more of its personnel on deputation, give them more access, liistudio.com, 18 October 2019.
  18. ^ a b Rajnath Singh Pushes For Indigenisation Of Defence Equipment, NDTV, 16 September.
  19. ^ "Diplomatic concerns prompt govt to abort export of Mine Protected Vehicles to Iraq".
  20. ^ "Defence Exports | Department of Defence Production".
  21. ^ http://164.100.77.100/pages/customers
  22. ^ "We're making Ordnance factories future ready, says OFB Chairman Dimri".
  23. ^ http://timesofindia.indiatimes.com/india/After-Mauritius-India-to-export-warships-to-Sri-Lanka/articleshow/45585454.cms
  24. ^ Majumdar, Arkamoy Dutta (30 November 2017). "India looking to scale up military hardware exports". Mint.
  25. ^ Pubby, Manu (3 August 2019). "In its largest ever export order, OFB to supply 50,000 Bofors shells to UAE". The Economic Times.
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  29. ^ "Defence Budget 2018–19: The Imperative of Controlling Manpower Cost". Retrieved 24 February 2018.
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  31. ^ "Annual Report 2013-2014" (PDF). Archived from the original (PDF) on 6 January 2018.
  32. ^ Pike, John. "Goa Shipyard Ltd". globalsecurity.org. Retrieved 20 April 2016.
  33. ^ "Goa Shipyard Annual Report" (PDF).
  34. ^ "HAL India Annual Report" (PDF).
  35. ^ https://mazagondock.in/writereaddata/pdf_doc/Annual_Reports/Annual_Report_English_2017-2018.pdf
  36. ^ "Mazagon Dock Shipbuilders Limited – Ship Builder to the Nation". mazagondock.gov.in. Archived from the original on 19 April 2016. Retrieved 20 April 2016.
  37. ^ https://economictimes.indiatimes.com/mishra-dhatu-nigam-ltd/profitandlose/companyid-4499.cms
  38. ^ https://www.sebi.gov.in/sebi_data/attachdocs/apr-2018/1522924415143.pdf
  39. ^ "::Mishra Dhatu Nigam Limited::Home::,superalloy, titanium, special steel industry". midhani.gov.in. Archived from the original on 1 May 2016. Retrieved 20 April 2016.
  40. ^ https://pib.gov.in/newsite/PrintRelease.aspx?relid=188533
  41. ^ https://ddpmod.gov.in/about-department-defence-production
  42. ^ a b c d e ISRO, DRDO sign MoUs for Gaganyaan mission, The Economic Times, 17 September.
  43. ^ a b DRDO signs pacts on Transfer of Technology with 16 companies, The Economic Times, 18 October 2019.
  44. ^ 50 India Inc representatives to accompany Rajnath Singh to Russia to explore JVs, The Economic Times, 31 October 2019.
  45. ^ "Make in India: Big role for private firms in defence", Mint, 15 February 2016
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  47. ^ https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1582739
  48. ^ https://economictimes.indiatimes.com/news/defence/post-pulwama-government-grants-more-financial-powers-to-the-3-services-for-weapons/articleshow/68916823.cms?from=mdr
  49. ^ a b https://economictimes.indiatimes.com/news/defence/defence-industry-received-2-18-million-fdi-in-2018-19-government/articleshow/69960949.cms?from=mdr