Can India go from world’s largest arms importer, to big weapons dealer?

NEW DELHI: India’s defence sector is now nursing an ambitious dream- to go from the biggest arms importer in the world to a weapon’s manufacturer and eventually an exporter to reckon with. It is a giant leap that India’s formidable neighbour China has already taken. 

From being the largest arms importer in 2006, China transformed into the world’s sixth-largest defence exporter by 2011. However, given the current state of India’s defence research and industrial base, is it a mission impossible, or can India under the new push by Prime Minister Narendra Modi’s government to foster a domestic arms industry, within a greater nationwide initiative he calls “Make in India,” deliver the dream? 

Analysts consider former Indian prime minister Manmohan Singh’s two terms “the lost decade” for India’s defence sector. It was a decade characterised by a spectacular drift within the defence ministry with a muddled policy to buy arms, a stunted capability to build them domestically and a shortage of critical equipment. India’s aspirations for a seat at the UN Security Council were unleavened by the fact that for three straight years it was the world’s largest net importer of defence equipment, sourcing arms worth Rs. 83,458 crore or nearly 60% of its needs from four P5 nations.

For more than a decade, India shopped around the world in search of a deal for more than $1 billion worth of helicopters to replace about 200 of its military’s ageing light-utility aircraft.

However, in August this year, the new Indian government under Mr. Modi’s leadership, with Arun Jaitley in-charge of the defence ministry, surprised many by abruptly scrapping the request for global bids to buy the helicopters in favour of manufacturing them in India instead.

In recent months, India has reversed two more proposals for buying transport aircraft and submarines and decided to make them at home. All this is part of the ambitious new initiative to ‘Make in India’ and to foster a domestic arms industry. 

The Washington Post reports that India is still the world’s largest buyer of weapons, accounting for 14 percent of global arms imports, almost three times as many as China. Over the next seven years, India is likely to spend more than $130 billion importing arms, officials say, to upgrade its understocked, Soviet-era arsenal with modern weapon systems.

India’s military modernisation can generate billions of dollars worth of business for American companies, but it also helps strengthen the nation’s strategic role in the region, at a time when the Indian and U.S. militaries are conducting more and more joint exercises. The massive buying spree coincides with India’s growing border tensions with China and Pakistan, and the approaching drawdown of international forces from Afghanistan this year.

The United States has now surpassed Moscow as India’s biggest arms supplier. In the past three years, India spent nearly $14 billion importing weapons, of which more than $5 billion worth were purchased from the United States. Russia was a close second, with a little more than $4 billion in arms sales to India.

Analysts say that closer defence ties between India and the United States are a key part of what both countries hope will be an improved relationship, and what President Obama has called “the defining partnership of the 21st century.”

But for American companies, working with India can be frustrating, and the country ranks low on the World Bank’s global “Ease of Doing Business” index. The slow pace of decision-making, a 49 percent limit on foreign investment in Indian defence firms and mandatory obligations to invest in local defence manufacturing remain irritants for American businesses.

India’s fiercely independent foreign policy stance and its reluctance to fully embrace the United States as an ally also have hindered a full strategic alliance.

Now, Modi wants to upend ¬India’s arms-importer tag and turn the country into not only a defence manufacturer but also a major weapons exporter, much like China has become in the past several years.

“We dream of making India strong enough to export defence equipment to the world,” Modi said in August after christening India’s largest home-built naval warship. “Instead of having to import every little defence hardware, we want India to become an exporter of these equipment over the next few years.”

To realise this goal, the government removed the laborious license requirements on almost 60% of the defence products for private manufacturing companies. Earlier this year, the government raised the limit on foreign investment in the defence industry from 26% to 49% to encourage more partnerships with foreign investors. “We want that the global defence companies should come to India not merely to sell to us but also to manufacture here and export to other countries,” said Amitabh Kant, secretary of the Department of Industrial Policy and Promotion in New Delhi.

But that still may not be enough to bring critical defence technologies to India, foreign defence companies say. “Quantitatively, raising the cap from 26% to 49% is a step in the right direction,” said Pratyush Kumar, president of Boeing India, which has secured ¬two-thirds of the defence trade with the United States. “Qualitatively, nothing changes because it doesn’t give control to the foreign investor.”

Analysts say India has speeded up defence decisions. The United States and India have hastened discussions since May on specific projects for co-production, such as antitank guided missiles, carrier-based aircraft launching systems and unmanned aerial vehicles, said Rahul S. Madhavan, director of aerospace and defence policy at the U.S.-India Business Council in Washington. “These are not offers that come every day,” he said. “India is now almost on par with NATO countries if you look at the kind of defence technology that are being offered by the U.S.”

But critics say India is being torn by two competing goals: the nationalistic aspiration to produce weapons locally and the urgent need to fix the crippling shortages in the military.

The armed forces desperately need new helicopters, submarines, combat jets and minesweepers. Even its tanks do not have enough shells. Soldiers are still waiting for lightweight bulletproof vests, assault rifles, night-vision equipment, combat boots and helmets.

In the past decade, key decisions on military acquisition were delayed. In the infamous “lost decade” under A.K Antony as India’s previous defence minister, “We lost a decade when absolutely nothing moved,” said Arun Prakash, a retired navy chief. “The last government blacklisted so many defence companies just at the hint of wrongdoing that the military was left with almost no sources to buy from. Purchases are put on hold, investigations go on interminably or are just forgotten. That has been really damaging to the armed forces.”

Officials say the government is likely to overhaul the policy of mandatory obligations to invest in India and align it closely with Modi’s manufacturing drive.

However, despite the push, many defence experts say India is not ready to make the giant leap China has made. “Becoming a defence exporter is a noble aspiration but it will take a lot of doing,” Prakash said.

Moving from having a part-time defence minister in Arun Jaitley, to having a full-time man in the driver’s seat with Manohar Parrikar who happens to also be an IIT graduate with a reputation as a performer, India’s ailing defence sector may have finally acquired a rudder and could be moving in the direction of much-needed reform.  

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