India is among the top ten countries in terms of military expenditure and the world’s largest arms importer with a 15 per cent share of international arms imports between 2010 and 2014.
About 1.8 per cent of the country’s GDP is currently allocated towards defence spending, but only about 30 per cent of India’s equipment is manufactured in the country, with most of the rest coming from Russia, the US and Israel, according to 2015 procurement data by the Ministry of Defence.
But this is going to change. Prime Minister Narendra Modi’s plans to make India a manufacturing powerhouse include a strategy for the defence industry — the government plans to spend no less than $250 billion (about Dh918 billion) over the next ten years in a bid to modernise the military equipment for what is the world’s third-largest army, fourth-largest air force and seventh-biggest navy.
According to Bloomberg, Modi has cleared $65 billion of arms purchases since coming into power in May 2014, including about $4.5 billion of Russian weapons signed in Moscow on Christmas Eve during Modi’s visit there.
The Indian Air Force also confirmed earlier this month the government has agreed an order of 36 Rafale jets — or two squadrons, at more than $100 million per aircraft — from the French government. The long-stalled deal is along the same lines as the 59 Mirage 2000s delivered in 1985 and came to fruition after Modi intervened during his visit to Paris in April. According to reports, India could buy an additional 18 warplanes at a later stage.
“If India has to be self-reliant in the area of security according to our armed forces’ needs, we have to make our own weapons,” Modi said earlier this month when he laid the foundation for a Rs50-billion (about Dh2.8 billion) greenfield helicopter project by Hindustan Aeronautics, a large state-owned aviation and defence company.
Bolstering domestic industry
Modi is trying to boost the country’s arms industry by both strengthening domestic companies as well as forging closer ties with foreign partners. For example, a recent major deal with Russia includes building 200 Russian-designed Kamov Ka-31 helicopters in India and an air defence cooperation between Almaz-Antey, Russia’s state-owned weapons producer, and India’s Reliance Defence, part of tycoon Anil Ambani’s Reliance Group conglomerate.
This arms deal has great significance: It gives Russia’s sanction-hit economy much-needed breathing room, while also strengthening India’s position in the international arms supplier market. Furthermore, it helps the latter to become more independent from US arms imports at a time when the exchange value of the US dollar is beginning to rise, making weapon imports more expensive.
After the deal was signed, Commerce Minister Nirmala Sitharaman even suggested a revival of rupee-rouble trade could be on the cards, or even a return to barter, as during the Soviet era.
Licence for growth
On the home market, the government has issued 81 defence industrial licences to 61 local companies since Modi launched the Make in India programme in September 2014, the Ministry of Defence revealed last month. Since the Prime Minister took office in May 2014, about 100 licences have been awarded — about a third of the total since 2001.
Meanwhile, Defence Minister Manohar Parrikar has set an ambitious target of achieving 50 per cent indigenisation in the defence industry by 2017, and up to 70 per cent by 2022.
“Defence exports from India’s private sector surged in the current fiscal year as the industrial reforms introduced by Modi begin to take root,” says Jon Grevatt, Asia-Pacific Analyst at defence consultancy IHS Jane’s.
He adds that the total value of defence exports during the first half of fiscal year 2015-16 — which runs from April to March — was $104 million, with 63 per cent of sales attributable to the private sector.
This is significant, as all these factors make the Indian defence market one of the most attractive globally and provides an immense opportunity for both domestic and foreign players in the sector. Locally, half a dozen companies are seen as front runners for a slice of the defence sector pie, including large groups such as Tata, Mahindra and Mahindra, Hero and Reliance, as well as others including Bharat Forge and Hinduja.
They all have strong ties with foreign arms manufacturers, aviation companies and infrastructure service corporations. Tata, for example, is cooperating with Honeywell to build navigation systems and with Airbus to manufacture logistics aircraft for the Indian Air Force, while Reliance Industries is partnering with Dassault Aviation to build fighter jets and with Boeing to make naval reconnaissance aircraft for the Indian navy.
The state-owned Hindustan Aeronautics — involved in design, fabrication and assembly of aircraft, jet engines, helicopters and spare parts — built the HF-24 Marut, the first fighter aircraft made in India, as early as 1961. Today, the company makes more than 40 per cent of its $2-billion revenue from international manufacturing deals with partners such as Lockheed Martin, Sukhoi, Tupolev, Ilyushin, MiG Corporation, BAE Systems, EADS, Airbus, Boeing, Dassault Aviation and many others.
A lot to sea
As for the Indian navy, its main domestic supplier is Mumbai-headquartered Mazagon Dock, which manufactures warships and submarines, among others. The company made the first indigenously designed and built frigates in the 1980s, the INS Godavari class, which were followed by other types. The latest one, the 17A-class, will be built by Mazagon Dock and Kolkata-based Garden Reach Shipbuilders & Engineers in cooperation with Italian shipbuilder Fincantieri. The construction of the first ship is expected to start by early 2017, and the launch is expected for 2020 after the shipyards are upgraded to incorporate modular construction techniques.
Commission for a new class of stealth guided missile destroyer ship — the Visakhapatnam class currently being built by Mazagon Dock utilising Russian design and know-how — is planned for 2018.
Furthermore, sea trials of the INS Arihant, India’s first nuclear-powered ballistic missile submarine took place last year. The submarine is likely to be commissioned next month, while another such vessel, the INS Aridhaman, is under construction. According to IHS Jane’s, work on a third will start soon.
Finally, the most impressive piece of home-grown army equipment, India’s first indigenously built aircraft carrier, the INS Vikrant, reached an important milestone last year when it was undocked and floated in June at the shipyard in Cochin.