India's Defense Challenge

Introduction 

Military self-sufficiency has been the paramount goal of every Indian government. The Modi administration has likewise sought to reduce dependence on arms imports by pursuing an independent domestic industrial base. At the end of 2014, however, India was the largest importer of major weapons, importing about 15% of the world’s supply. Russia remains the largest supplier of arms to India, though its percentage has decreased from 67% in 2013 to 50% in 2014. The United States (27%) and Israel (13%) are strong contenders with European countries following at  9%. Self-sufficiency is thus far from the reality. 

Data Source: SIPRI

Data Source: SIPRI

In Hudson Institute’s March 2014 conference and report, Manoj Joshi and Roger Zakheim argued that India cannot achieve self-sufficiency, as the country does not have the necessary technology or knowledge, and cannot survive in autarky. Further, it has made little progress in reforming its national security system management and does not have adequate personnel to give direction. Rather, India must find export markets by joining global supply chains and sharing costs and profits with its commercial partners, especially American ones.

Modi Administration Policies

In June 2014, Prime Minister Narendra Modi claimed that India would soon become self-reliant in the defense equipment manufacturing industry and should look forward to exporting weapons soon. “The small countries should feel secure that they have India-produced defense equipment,” stated Modi. Finance Minister Arun Jaitley declared that India is “pursuing the Make in India policy to achieve greater self-sufficiency in the area of defense equipment, including aircraft."

In February 2015, Modi vowed that 70% of arms would be manufactured in India itself by the end of the decade. "We have the reputation as the largest importer of defense equipment in the world...But this is one area where we would not like to be number one. We are reforming our defense procurement policies and there will be a clear preference for the equipment manufactured in India," declared Modi. He added that "foreign players can use India as part of their global supply chain” to reduce costs, thereby heeding Manoj Joshi’s 2014 suggestion. In this vein, during Jaitley’s visit to the United States in April 2015, he stated that India has relaxed limits on FDI in defense manufacturing.

The Indian government thus changed its Defense Procurement Procedure (DPP) to “’Buy [and Make] (Indian)’ instead of ‘Buy (Global)’” to fit in with this campaign. The Make in India defense project promotes strategic partnerships between foreign manufacturers and Indian companies.

US-India Defense Ties

The US has risen to the challenge of supplementing India’s defense industry, especially after the deepening of India-US defense ties opened up key areas of collaboration. The US-India Joint Statement during President Obama’s January 2015 visit to India presented new provisions for the "co-production of low-end weapons in India and the transfer of technology through the Defense Trade and Technology Initiative (DTTI)." The DTTI aims to promote defense trade and technology transfer between the two countries. It represents the United States’ commitment to creating an indigenous Indian defense industry by "pre-screening projects for co-production." January 2015 also saw the launch of the US-India Knowledge Partnership in Defense Studies, further linking the two countries in military education.

In June 2015, US Defense Secretary Ashton Carter and India’s Defense Minister Manohar Parrikar signed and renewed the 10-year Defense Framework Agreement to reflect their relationship’s “positive trajectory.” The 10-year Agreement includes a commitment to ensuring maritime security in the region, especially the South China Sea, as both countries annually conduct naval exercises in the area. The US-India Joint Strategic Vision reaffirmed this commitment.

The Indian and American governments have agreed to initiate two DTTI projects: building generators and developing protective military gear for chemical warfare. They have each committed $500,000 over two years for each project. The US had also hoped to include a provision to begin joint production of drones, although this did not materialize. However, India is planning to export drone and spy equipment to the US to further develop their partnership. India is also keen on acquiring American aircraft launch technology for a carrier it wishes to build.

India has purchased large amounts of defense equipment from the US, including aircraft and missiles. India's Ministry of Defense approved the purchase of Boeing Apache and Chinook helicopters for $2.5 billion in August 2014, and in July 2015, India cleared the purchase of four Boeing aircrafts worth $4.74 billion in sum. Additionally, USA's Lockheed Martin has entered into a joint venture with Tata Advanced Systems Limited (TASL) to produce parts for a plane. TASL recently signed agreements with Boeing as well, to collaborate on defense manufacturing. American defense contractor Raytheon has also invested in India.

Data Source: SIPRI

Europe, Israel, Asia & India

As of May 2015, 46 licenses were issued in the defense sector. On July 3, Airbus entered into a joint venture with Mahindra Group to manufacture helicopters for the Indian Armed Forces. Russia also signed a deal to build 200 Kamov Ka helicopters in India. Moreover, Israel's Rafael Advanced Defense Systems and India's Kalyani Group entered into a joint venture to develop weapon systems, while Israel Aerospace Industries and India’s Alpha Design Technologies agreed to manufacture unmanned aerial vehicles for India. Other companies such as the UK's BAE India Systems, Switzerland’s Pilatus, and France’s MBDA have also invested in India. Japan and Korea have also expressed interest in investing in India.

However, the Dassault Rafale deal with France proves that 'Make in India' alone cannot provide India with the military equipment it requires. The state-run Hindustan Aeronautics Ltd (HAL) was rumoured to have entered into a joint venture with Rafale in the initial stages, but was not included in the final deal. Instead, the Modi government purchased 36 jets straight off the shelf from the French company. 

Challenges and Opportunities

The Indian defense industry faces numerous challenges, foremost amongst them being India’s lack of necessary technology and investment to be self-sufficient in defense. To modernize its armed forces, India will need to diversify its arms acquisitions and streamline licensing processes. This will incentivize foreign and domestic companies to increase their participation, as evidenced by the 46 licenses issued in the sector already. The US-India partnership is especially significant, as reflected in the renewal of the 10-Year Defense Framework Agreement and the DTTI projects already in place. The future of India’s defense sector lies in making pragmatic equipment purchases to develop its military, while simultaneously boosting its domestic industry through investment and technology.