Key Aspects of India’s Arms Export Policy amid Military-Industrial Complex Reform

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Introduction

Recent global geopolitical upheavals and the escalation of regional military conflicts have elevated the “Cool war” between the United States and Russia to a significant confrontation level (Khudoley, 2022). This has prompted many nations to reassess their national defence capabilities and strategies for developing their military-industrial complexes. India, a key player in the international relations system, serves as a prominent example of a state giving considerable attention to this aspect. The policy of reforming the Indian military-industrial complex (MIC) has been playing an important role in Prime Minister Narendra Modi’s overarching agenda since the Bharatiya Janata Party (BJP) assumed power in 2014. One of the focal points of this policy is to reduce India’s strategic dependence on foreign arms imports, emphasising a most rapid transition to the domestic production of a wide range of weapons and equipment. This military-industrial development aligns with Prime Minister Modi’s broader strategy of positioning India among the world’s leading powers and integrating it into global value chains. The government’s approach includes openness to foreign technologies and investment in the military-industrial sector along with an active participation of private Indian enterprises.

During the 2000s, the strategic objectives of the Indian government were also directed towards reducing dependence on arms imports. However, a heightened emphasis on an export-oriented policy was not pursued during this period. The opening up of the military-industrial complex to private manufacturing companies in 2001 marked a crucial step towards industry reform. The Defence Procurement Procedure (DPP), enacted in 2002, prioritised military products manufactured in India for public procurement, offering state support to selected military industries.¹ Nonetheless, products from Indian defence enterprises often faced obstacles in achieving parity with analogous weaponry and equipment from other nations, thereby often failed to meet the requirements of the Indian armed forces. Notably, India ranked 40th among the 86 arms exporting countries in 2001. Still, by 2011, it had remained at the 37th position within the list of 74 countries.²

The strategy adopted by the BJP government upon assuming power in 2014 proved to be coherent and contributed significantly to the advancement of India’s military-industrial complex as well as to the expansion of India’s exports of arms, military equipment and special equipment (WMSE). The implemented measures resulted in a discernible and consistent decline in India’s reliance on foreign arms imports. In contrast to the  2011–2015 period, India’s procurement of foreign weaponry decreased by 33% during the 2016–2020 period.^[3]

In 2018, the BJP government revealed an ambitious plan aiming to position India among the top five global producers and exporters in the military and aerospace industries by 2025.⁴ The implementation of this plan was supported by an active state policy aimed at fostering the export of Indian weapons and equipment. In 2020, India achieved a milestone by securing a position in the list of the world’s top 25 arms and military equipment exporters for the first time, ranking 23rd. Indian Defence Minister R. Singh reported a substantial growth of 334% in Indian defence exports from 2016 to 2021, with 75 countries worldwide becoming buyers of Indian weapons and equipment.⁵ The Indian government outlined its plans to achieve a total production increase of WMSE by 25 billion USD by 2025, generating 5 billion USD in export revenue.^[6]

In this regard, it would be prudent to examine the principal areas and characteristics of the Indian government’s policy aimed at stimulating and expanding national exports of arms, military and special equipment. Additionally, an assessment of the interim results and potential prospects of this policy is crucial. It is imperative to emphasise that the analysis of the Indian WMSE export development policy cannot be conducted separately from the key changes taking place in the defence planning system and the ongoing reforms within the Indian MIC. To achieve this objective, the most appropriate approach should be to involve the structural and functional method, coupled with applied political analysis encompassing both theoretical-fundamental and instrumental-empirical dimensions, including event and retrospective analysis.

The underlying hypothesis of this article is that the policy of promoting the WMSE export, in the broader context of the ongoing reform of the Indian MIC, serves not only to reduce India’s dependence on arms imports, but also to enhance strategic relations with buyer  countries. This strategic initiative is particularly important for India’s efforts to counterbalance the growing influence of the People’s Republic of China (PRC) in South and Southeast Asia. In addition, the policy is seen as a means  to gain political dividends by serving  as a showcase for Prime Minister Modi’s political and economic reform agenda. Nevertheless, achieving “strategic autonomy” and, even more ambitiously, positioning India at the forefront of the world’s arms exporting nations remains questionable, particularly  given the current capabilities of the national military-industrial complex and the manufacturing industry, and this scepticism persists even for the long term.

The First Stage of Reforms  and the Make in India Programme

After coming to power in May 2014, the BJP government championed the “Make in India” programme, a national initiative associated with Prime Minister Modi. The programme, which advocated collaborative initiatives with foreign manufacturers, sought to facilitate the relocation of industrial production to Indian territory, contingent upon the transfer of production technologies to India. This approach enhanced the investment attractiveness of the Indian industrial sector and increased the level of production in the defence industry (Behera, 2016; Desouza, 2016,  pp. 34–35). The “Make in India” programme specifically targeted the military-industrial complex as a vital component of the manufacturing sector (Cowshish, 2016, pp. 8–9).

As reforms to the military-industrial complex began, the new Indian authorities focused on stimulating exports of military-industrial products. In September 2014, the Defence Export Steering Committee (DESC) was inaugurated to unite key entities within India, including the Indian Armed Forces and the Defence Research and Development Organization (DRDO). The DESC was established to coordinate government agencies and enterprises to streamline the export of Indian weapons and military equipment.^[7] To attract both public and private producers,  the export license procedure for India’s WMSE has been significantly simplified. In 2015, Indian authorities recommended that defence enterprises in the public sector increase their exports to 10% of the total annual production.^[8] This initiative was aimed at improving the quality of Indian weapons and enhancing the technological level of production lines, positioning India for international competition in WMSE products. This was seen as a necessary step towards developing a wider production capacity and preparing the MIC for a competitive full production cycle, including all stages — from initial development to the final introduction of these products in international markets.

In 2016, the Ministry of Defence issued an updated version of the DPP, which outlined the state strategy for the planning and promoting the Indian military-industrial sector for the previous years (Ganapathi, 2016, pp. 7–9). This document envisioned a significantly expanded involvement of Indian private micro, small, and medium enterprises (MSMEs) in the development of the defence industry.^[9] This particular aspect is frequently identified by Indian experts as one of the crucial elements for overhauling the entire military-industrial complex (Kaushik, 2017, pp. 41–44). Particular emphasis was placed on the potential for joint ventures with foreign manufacturers willing to invest in upgrading production capabilities in India. This was underscored within the framework of India’s offset policy, which entails the transfer of production technologies as part of the technology transfer arrangement (Chhibber, 2018, p. 39).

Influence of Indo-Chinese Contradictions

The modernisation strategy of India’s armed forces and military-industrial complex has been significantly influenced by external factors, particularly the escalating tensions with China. The heightened antagonism between New Delhi and Beijing became increasingly evident against the backdrop of growing competition for influence over the Indian  Ocean states and the exacerbation of frozen territorial disputes (Cowshish, 2014a, p. 5; Pakanati, 2019). China was displacing India from its longstanding markets within South Asia and cementing relations with Pakistan — a strategic adversary of India (Chakravorty, 2022, pp. 19–22).

China’s geo-economic expansion across South, Central and Southeast Asia coincided with an intensification of the foreign policy rhetoric emanating from the Chinese authorities. Amidst the persistence of the “partnership — rivalry” paradigm in Sino-Indian relations, the substantial overhaul of the Chinese armed forces in 2015 was interpreted as a potential threat to India’s national interests and sovereignty, particularly in the disputed regions along the Line of Actual Control (LAC). At the same time, India’s allocations for the modernisation of its armed forces remained traditionally modest when juxtaposed with the extensive investments made by the People’s Liberation Army (Cowshish, 2014b, p. 9). The stand-off between Indian and Chinese troops on the Doklam plateau in 2017 was seemingly regarded in New Delhi as a litmus test by Beijing, gauging India’s response to attempts at altering the status quo in contested regions of the LAC. In this context, the strategic importance of reforming the military-industrial complex expediently and strengthening the capabilities of the Indian armed forces became increasingly apparent.

The Second Stage of Reforms  and Growing Export Ambitions

Since 2018, the BJP government has adopted a more proactive approach to the development of the military-industrial complex, implementing a series of reforms to enhance the interoperability of the armed forces and their commands (Choudhary, 2022, p. 34; Pant, 2020, pp. 6–7). In particular, the establishment of the Defence Planning Committee (DPC) stands out as a pivotal institutional link within the Ministry of Defence, shaping the trajectory of the Indian MIC’s development. The DPC consolidated the heads of the key institutions responsible for defence planning in India into a single organization (Behera, 2021a, pp. 23–24).

At the same time, the establishment of military-industrial corridors in Uttar Pradesh and Tamil Nadu, designed to enhance production capabilities, streamline logistics, and encourage collaboration between public and private enterprises, was a landmark initiative. Furthermore, there has been a notable surge in export targets with the 2017 export plan more than doubling (Suman, 2021, pp. 89–95, 135–139). In 2018, the Draft Defence Production Policy set a target of 350 billion rupees (approximately 5 billion USD) for Indian defence exports by 2025.^[10]

The BJP government took significant steps to carry out these ambitious plans. Licencing rules were notably simplified to attract private manufacturing companies previously not involved in defence production. The production of approximately 60% of various military product components was made licence-free.¹¹ Private Indian manufacturers emerged as key players, obtaining over 85% of all export licences in 2019–2020^[12]. Additionally, in alignment with the suggestions of key analytical centres and relevant organisations in India, the government permitted the DRDO to transfer directly the acquired foreign military technologies to private Indian enterprises actively engaged in the production of WMSE.^[13] This approach aimed to enable DRDO to focus on new technologies and prototypes while facilitating the swift deployment of production-ready solutions by the manufacturing sector (Behera, 2021b). In order to intensify exports, the Export Promotion Cell was established within the Department of Defence Production in 2019.^[14]

Following its decisive victory in the 2019 general parliamentary elections, the Modi government initiated a rebalancing of management structures within the Ministry of Defence. The introduction of the Chief of Defence Staff (CDS) position in 2020 and the creation of the Department of Military Affairs strengthened the role of the military community in strategic decision-making, enhanced interagency cooperation and reformed the defence planning system. The military elites obtained a decisive role in advising the government on the formulation of military diplomacy in relations with countries involved in developing military-technical cooperation with India. The implemented reforms brought about a radical departure from the established practices of the previous decades. Since the 1950s, the leadership of the governing bodies within the Ministry of Defence had consistently been held exclusively by civilians. This was done to safeguard against the potential threat of a military coup. However, the downside to this approach was the challenge it posed in implementing structural reforms within the management of the armed forces and the Indian MIC (Singh, 2016, p. 30–31).

Self-Reliant India Campaign  and Defence Acquisition Procedure

In his annual address to the nation on May 12, 2020, Prime Minister Modi introduced the Self-reliant India Policy — a comprehensive programme to support key sectors of the Indian economy.^[15] As part of this all-encompassing national programme for economic and industrial development, the strategy for the expansion of military production aimed to achieve a milestone whereby Indian enterprises would be mandated to produce a minimum of 75% of all WMSE procured for the Indian Armed Forces in the coming years. The impetus for this policy shift towards “self-sufficiency” was further fueled by a new phase of tensions along the Indo-Chinese border, exemplified by the tragic incident in June 2020 when twenty Indian soldiers perished in a border clash in the Galvan River Valley in Ladakh. The deterioration in Indo-Chinese relations concomitantly witnessed an augmentation of the Indian military contingent in the western sector of the LAC. The heightened assertiveness of China’s position regarding the contentious borders in said area was construed within Indian political and academic circles as yet another manifestation of Beijing’s strategy to restrain India’s global ambitions within the South Asian region (Singh, 2020, pp. 4–5; Sharma, 2021, pp. 14–16; Kalyani, 2021, pp. 149–155).

In September 2020, the Indian Ministry of Defence introduced the Defence Acquisition Procedure (DAP), which replaced the previous Defence Procurement Procedure. Both documents aimed at emphasising forced indigenisation of defence production and enhancing the planning system for state military procurement. However, the most recent iteration of the law has undergone notable innovations. The DAP increased the maximum shares of foreign direct investment (FDI) in Indian defence sector manufacturers. Under the new regulations, companies with foreign investment of up to 74% are automatically granted a licence for the production of weapons, military and special equipment, which is now under the automatic route. If this limit is exceeded, the government approval route is required. In cases involving the transfer of full production technology to India, the FDI limit could reach 100%,¹⁶ indicating a deliberate effort to attract foreign capital and adopt advanced technologies for the qualitative development of the Indian military industry.

Reforming State-Owned Defence Enterprises and Protectionist Measures

A key document, the Draft Defence Production and Export Promotion Policy focuses on stimulating exports of nine state-owned defence enterprises with a special status as Defence Public Sector Undertakings (DPSUs).^[17] In 2021, as an integral part of this policy, a restructuring initiative was implemented targeting one of the oldest state-owned MIC organizations. This entity had long been criticized by experts for its perceived low production efficiency and excessive bureaucratisation. On the basis of the Ordnance Factory Board, which had comprised 41 ordnance factories, seven new DPSU were established.^[18] The primary objective was to cut elevated production costs, enhance product quality, and minimise delays in delivering finished products to the Indian Armed Forces.

In 2021, in order to achieve the goal of “self-sufficiency,” the Ministry of Defence introduced “negative lists,” imposing an embargo on the import of foreign components and parts used in the production of weapons and military equipment. In 2021–2022, several lists of “positive indigenization” were released, encompassing over 2,500 items of military products, materials, and 351 “high value imported items” that are exclusively procurable from Indian manufacturers.¹⁹

The imposition of such restrictions evidently aims to bolster Indian manufacturers engaged in the production of either exact or closely analogous versions of the prohibited for import military items. It is postulated that the requirement to procure exclusively Indian variants of various types of weapons for the Indian armed forces will enable domestic manufacturing companies not only to increase sales within the country but also potentially to gain access to international markets in the future. Conversely, A. Cowshish contends that many of the names included in these lists, particularly in the Supplementary List of Parts and Consumables issued in August 2022, are “low technology and easily indigenisable” items.²⁰ Such an approach to compiling lists undoubtedly eases the Indian Defence Ministry’s efforts to report higher indigenisation percentages of WMSE purchases.

Joint Military-Technical Cooperation Projects

Against this backdrop, it is important to provide a concise overview of the level of cooperation between Indian manufacturers and companies from states that maintain developed relations with India in the field of military-technical cooperation. As of 2021, there were 44 joint ventures in the Indian defence industry.^[21] New Delhi exhibits its most robust relationships in military-technical cooperation with Moscow. Russia serves as India’s primary source, as until recently it was the only partner willing to facilitate technology transfer and provide cutting-edge weapons and equipment at reasonable prices (Likhachev, 2018, pp. 67–71).

The most renowned military-technical cooperation is the Indian-Russian BrahMos project, a supersonic anti-ship cruise missile (ASCM) recognised for its balanced and versatile capabilities, garnering interest from various countries engaged in arms imports. In 2020, Russia agreed to India’s market release of BrahMos internationally for sales to third-party nations. However, the export prospects of this cruise missile may encounter obstacles due to the potential application of Countering America’s Adversaries Through Sanctions Act (CAATSA) against the export of Russian weapons. Nevertheless, potential sanctions against third countries expressing interest in acquiring BrahMos do not hinder the ambitions of the Indian manufacturer, BrahMos Aerospace, which aims to secure orders totaling 5 billion USD by 2025. Besides the Philippines, which signed a 375 million USD contract in 2022, the manufacturer counts Indonesia, Malaysia, and Vietnam among its priority buyers.²²

At the same time, India’s longstanding aspiration to avoid excessive dependence in strategic areas requires a diversified expansion of military-technical cooperation. In recent years, the cooperation between India and both the United States and France has been rapidly evolving. The outcomes of Prime Minister N. Modi’s official visits to the United States and France in the summer of 2023 proved significant. Both Washington and Paris have shown increased interest in collaborating on military-technical ventures, technology transfers, and relocating military-industrial complex production to India.²³

It is worth noting that between 2021 and 2023, Indian-Israeli cooperation in the joint development and production of unmanned aerial vehicles (UAVs) strengthened. Additionally, India is exploring the potential for collaborative arms development with South Korea, Singapore and several other states. While the results of these joint development projects will only become apparent in the medium term, by 2023, New Delhi’s inclination towards closer cooperation with arms manufacturers from Western countries had become evident.

Economic Instruments for Export Promotion

A key element of the export support policy is the financing of contracts for the acquisition of the Indian WMSE. This scheme facilitates cooperation with Indian manufacturers by engaging countries worldwide that possess comparatively limited financial capabilities but wish to modernise their national armed forces with relatively contemporary weaponry. The Export-Import Bank of India (EXIM Bank), serving as the primary government agency overseeing export and import operations in India, plays a central role in financing such transactions. For instance, in 2019, EXIM Bank established a credit line amounting to 500 million USD, earmarked for the export of diverse Indian WMSE to the Republic of Bangladesh.^[24] By 2021, EXIM Bank had disbursed loans totaling more than 900 million USD to facilitate the export of Indian weapons.²⁵ The granting of credit lines for the sale of Indian arms and equipment to countries in the Asia-Pacific region represents a pivotal element of New Delhi’s strategy to broaden the export footprint of its products in international markets. The provision of loans for arms deals is particularly conspicuous in India’s military-technical cooperation with Southeast Asian countries. This approach is to be construed as a clear manifestation of India’s diplomatic strategy, wherein the sale of its WMSEs serves to bolster its strategic presence in the region (Ram, 2018, pp. 59–62, 64–67).

Export of Weapons and Equipment  as a Foreign Policy Mechanism

The trade in arms and military equipment serves as an effective means for enhancing New Delhi’s diplomatic relations with neighboring states in South and Southeast Asia. Given the escalating tensions between India and China, this aspect is expected to play a progressively significant role in shaping India’s engagements with countries across the Asia-Pacific region, including Vietnam, Bangladesh, Sri Lanka, Indonesia, Malaysia, and states in the Middle East. Notably, in October 2020, India presented Myanmar with the INS Sindhuvir, a diesel-electric submarine upgraded from the Soviet Project 877 Paltus, as a symbolic gesture to underscore the strategic depth of their relationship. The primary objective of this move was largely to highlight the more advanced characteristics of the submarine as compared to similar offerings available for purchase from China.²⁶

Subsequent to the clashes in Ladakh in 2020, there has been an increased emphasis on reinforcing the diplomatic dimension through arms sales, joint military exercises and the enhancement of bilateral relations in the Indian Ocean region (Thomas, 2020, pp. 10, 23). Observations by Indian experts indicate that since 2021, New Delhi has been deliberately escalating its WMSE exports to Southeast Asian states, positioning itself as a viable “alternative to China” and a more “reliable security partner.”²⁷ This aligns with the overarching foreign policy strategies of New Delhi, namely the “Neighbors First Policy” and the “Act East Policy” (Ranade, 2022, pp. 63–64).

Current Status  and Main Sales Markets

The initiatives taken by the BJP government convey a discernible and cohesive strategy indicative of a concerted effort to secure prominent positions in the global production and export of weapons and equipment. The surge in WMSE exports can be directly attributed to the comprehensive reforms within the MIC and concurrent state regulations in this area. The pursuit of a “strategic autonomy” strategy is aimed at ensuring that Indian enterprises progressively contribute a minimum of 75% of all weapons, military and specialised equipment procured for the Indian armed forces in the coming years. On the one hand, there is a noteworthy upward trend in the share of purchases from Indian manufacturers, rising from 58% in the financial year  2021–2022²⁸ to 68% in the financial year  2022–2023.²⁹ At the same time, India relies heavily on imports for the procurement of technologically sophisticated and advanced weapons and equipment, encompassing aircraft, tanks, submarines and state-of-the-art air defence missile systems among others. Despite India’s systematic efforts to increase localisation levels and facilitate licenced production or assembly domestically, there is a limit to reducing significantly the import dependency, especially concerning the newest and most advanced weapons and military equipment. Such a reduction could potentially compromise the nation’s security, underscoring the intricate fine line that India must follow in its pursuit of self-sufficiency in defence capabilities.

Conversely, there has been a discernible upturn in domestic production. A noteworthy milestone was the 2021 agreement for the delivery of 83 Indian Tejas Mk.1A fighters to meet the demanding requirements of the Indian Air Force.^[30] The Indian Air Force, known for its stringent criteria in weapons acquisitions, is poised to receive serial deliveries of this upgraded model in 2024, potentially providing fresh momentum to the global appeal of this lightweight Indian fighter. Additionally, a noteworthy international interest has been generated by the BrahMos missile defence system and the Akash air defence system, with negotiations for their supply to several nations reaching an advanced stage.

These cases underscore India’s rise to a higher level of capabilities, offering an increasingly competitive array of weapons and equipment. A distinctive niche in Indian exports focuses on the development of proprietary training computer programmes and combat simulations, particularly catering to militarily advanced nations, with a notable emphasis on the United States. Prominent importers  of diverse Indian weapons and equipment include countries of the Middle East and North Africa, namely Egypt, Saudi Arabia, Israel, Iraq and Algeria. Moreover, significant trade partners include major Western countries such as the United States, Australia and South Korea. In the Asia-Pacific region, Vietnam, Indonesia and Bangladesh stand out as strategically important markets for the Indian WMSE, highlighting India’s successful sales of a wide range of naval weapons. Simultaneously, Myanmar holds a prominent position as the largest buyer, accounting for 50%, while Sri Lanka and Armenia constitute 25% and 11%, respectively, of India’s recent military product acquisitions.³¹

Dependence on Foreign Technologies  and Insufficient Support for R&D

Despite the evident success of Indian WMSE exports, it is crucial to point out that these are essentially obsolete models of foreign weapons for which production technologies have been transferred to India. This includes a spectrum of weapons, ranging from aircraft and artillery to small arms and ammunition. The Indian side subsequently undertook some upgrades to align these models with modern requirements. Following the modifications, the “Indianised” variants of weapons and equipment are introduced to the international market as indigenous developments. However, apart from cost considerations, such weapon models typically possess fewer decisive competitive advantages compared to the latest Western or Russian developments.

Given all this, it is crucial to emphasise a significant systemic obstacle to the advancement of India’s military-industrial complex — India’s extensive dependence on foreign technologies and components for production. Notably, in the first half of the 2010s, the leading defence production  entities, Hindustan Aeronautics Limited and  Mazagon Dock Shipbuilders Limited, exhibited  a year-on-year dependence on imported  nodal parts, components and materials averaging 90% and 67% respectively (Behera, 2016, p. 44).

Despite the endeavors aimed at “positive indigenisation,” achieving a significant level of import substitution for critical weapon systems remains a formidable challenge. This predicament is further underscored in the broader realm of joint weapons development, where a salient reliance on foreign partners persists. Significant constraints include contractual limitations on technology and component transfers for production, restrictions on replicating licenced technologies and specific conditions governing investments in collaborative ventures (Desouza, 2017, pp. 74–78). Taken together, these factors intricately contribute to the complexity of achieving “strategic autonomy” and hinder the export potential of joint projects engaged in the production of advanced WMSE.

The implementation of ambitious export objectives is intricately linked to the effectiveness of the reforms of the military-industrial complex and faces impediments arising from a dearth of indigenous scientific, technical and developmental advancements in the military sector. A conspicuous factor contributing to this challenge is the limited government funding allocated to this sector within the Indian defence industry. It is pertinent to note that, in comparison to the considerably larger defence budgets of China and the United States, there is a notable disparity in the allocation of funds for new developments. On average, China provides around 20% of its total MIC expenditure to new developments, whereas the United States allocates approximately 12% for the same purpose.³²

From 2018 to 2022, India allocated an average of 4.3% of its budget to Research and Development (R&D) — a figure deemed insufficient, especially given the increased spending on the army and navy in the 2022–2023 fiscal year.³³ It appears evident that the Indian government has chosen to address this longstanding issue. The defence budget for the 2023–2024 financial year outlines a shift, with total spending on the modernisation of the Armed Forces and WMSE development set to comprise 29% of the overall budget. Consequently, funding for R&D is slated to increase to 7.2%.³⁴ However, it is essential to consider the relatively modest rates of original and promising initiatives of DRDO in preceding years (Pant, 2020, p. 221). Criticism of this organisation has traditionally revolved around concerns regarding the pace of new developments, the ultimate characteristics of new products, and significant cost overruns.

Henceforth, India is actively seeking to engage private enterprises in military-technical advancements. A noteworthy initiative of the Indian government in 2022 is to promote military technology startups in the private sector. Under the Innovation for Defence Excellence (iDEX) programme, the Indian government plans to allocate approximately 70 million USD from 2022 to 2026 to incentivise more than three hundred applications for military technical developments undertaken by small private enterprises, civilian inventors, research centres, and universities.³⁵

Facilitating this initiative is the Defence Innovation Organisation established in 2018 to enhance collaboration between public and private manufacturers and involve small private defence enterprises (Murti, 2020, 51). The Indian Ministry of Defence aims to allocate 25% of all expenditure on development and military-technical research to support of such startups.³⁶ Nonetheless, the outcomes of these measures are anticipated to materialise no sooner than 5–7 years and are likely to extend into the next decade.

The Disparity in Export Share Between DPSUs and Private Producers

In 2021, following a restructuring initiative, India’s Defence public sector undertakings received a government directive to increase the revenue from exports of WMSE to 25% of their total revenues by 2025.³⁷ To grasp the complexity of this mandate, it is instructive to examine the results from the financial year 2019–2020, when the collective share of export sales for the DPSUs stood at a mere 2% of their total revenues. This weak export performance was exacerbated by a notable imbalance — during the said period, Indian state-controlled defence enterprises collectively contributed less than 10% to the overall volume of Indian WMSE exports, with more than 90% of exports coming from products of Indian private enterprises. Furthermore, a significant portion, over 95%, of the total exports of weapons and military equipment by Indian DPSUs was attributed to industry leaders such as Hindustan Aeronautics Limited (HAL) and Bharat Electronics Limited (BEL).³⁸ Given the negligible contribution to export revenues by other Defence Public Sector Undertakings, even if the targets for 2025 are achieved, their combined impact on the total Indian exports of WMSE is likely to remain relatively insignificant.

Low Productivity Trap  and the Political Landscape

Another crucial aspect is the impact of the political environment on the policies of the BJP government in the military-industrial sector. Despite a consistently high annual GDP growth rate exceeding 7%, the share of production in India’s GDP has experienced a sustained decline over the past 14 years, lingering below the levels observed in the early 2000s.³⁹ This protracted low contribution of production to GDP, dating back to the 1960s, is indicative of a “low productivity trap” in manufacturing. The strategies employed by the BJP government to stimulate production through enhanced domestic private investment have yet to yield the desired outcomes.⁴⁰

The sluggish progress in India’s overall industrial development poses a substantial challenge to the broader economic reform agenda of Prime Minister Modi. It can be posited that, to a considerable extent, the emphasis on growing exports within the military-industrial complex is presented as a testament to the reforms undertaken by the BJP government. The surge in Indian arms exports is symbolically linked to the perceived successes of initiatives such as “Make in India” and “Self-Reliant India.”

This strategic focus on the development of Indian WMSE exports appears to be driven, in part, by political marketing considerations. The dynamic expansion of Indian arms exports serves as a tangible representation of the achievements of the BJP government under  N. Modi. In the fiscal year 2022–2023,  India saw a 24% increase in WMSE  exports, amounting to 159.2 billion rupees (approximately 1.9 billion USD), and since 2016, Indian arms exports have witnessed a tenfold growth.⁴¹ In this context, the heightened politicisation of this issue is particularly conspicuous against the backdrop of the BJP’s preparations for the 2024 general parliamentary elections.

However, the notable progress in recent years is overshadowed by its relatively small market share of the global arms export market. Despite increasing its share from 0.1 to 0.2%, India had failed to secure a position among the top 25 arms-exporting countries by the end of 2022.⁴² Consequently, India’s presence in the global arms and equipment market is expected to remain insignificant in the medium term. Therefore, there is a potential risk for the government in utilising export indicators as a political asset. The success or failure of achieving the targeted export figures of  350 billion rupees (approximately 4.2 billion USD) by 2025⁴³ could have implications for the popularity of the BJP government. Achieving this ambitious target is a significant challenge, requiring a 54% increase in total WMSE exports by April 2025.

Conclusion

The criticisms outlined above do not imply that opportunistic considerations consistently outweigh strategic ones in the policy of the BJP-led Indian government. The benefits of reforming India’s military-industrial complex and fostering the export of weapons, military and special equipment are indisputable.

First, in the short term, the pursued policy serves the opportunistic goals of the ruling party.

Second, in the medium term, the rate of exports of military hardware will enable India to bolster its presence in the international arms markets and enhance strategic ties with regional states to counterbalance China.

Third, in the long term, this policy will contribute to elevating the Indian military-industrial complex to a new level of production and technological advancement, thereby significantly reducing arms imports in favor of Indian manufacturers and moving towards “strategic self-sufficiency.”

While there are numerous challenges on the path to achieving these goals, a substantial   qualitative leap necessitates a sustained, systemic approach to reform and financing across the entire military production and development industry in India. This, in turn, is closely linked to overarching issues within the Indian manufacturing sector, encompassing insufficient modernisation and financing. Hence, India is keenly interested in attracting foreign investment and technology, not only in the military-industrial complex but also in the broader national industrial sector.

Therefore, it can be concluded that even in the long term, India’s entry into the group of leading countries exporting arms and equipment is unlikely. Achieving complete “strategic self-sufficiency” in the MIC should be viewed as a trajectory of India’s development under the BJP government rather than a strategic task with clear deadlines. Nevertheless, it is evident that the growth of WMSE exports constitutes a stable trend and will exert a substantial influence on the nature of India’s foreign policy with a focus on strengthening national defence capabilities and positioning India as a great power in the coming decade.

_{¹ Defence Procurement Procedure. Capital Procurement // Ministry of Defence of India. 2008. P. 1.  URL: https://mod.gov.in/sites/default/files/DPP2008.pdf (accessed: 05.04.2023).}

_{² Chander S. India’s Defence Exports. Status, Strategy and Solution // Manekshaw Paper. 2019. No. 83. P. 10. URL: https://www.claws.in/static/India%E2%80%99s-Defence-Exports.pdf (accessed: 05.04.2023).}

_{³ International Arms Transfers Level Off After Years of Sharp Growth; Middle Eastern Arms Imports Grow Most, Says SIPRI // SIPRI. March 15, 2021. URL: https://www.sipri.org/media/press-release/2021/international-arms-transfers-level-after-years-sharp-growth-middle-eastern-arms-imports-grow-most (accessed: 24.03.2023).}

_{⁴ Defence Production Policy 2018 // Make in India.  P. 4. URL: https://www.makeinindiadefence.gov.in/admin/ writereaddata/upload/Draft_Defence_Production_Policy_2018.pdf (accessed: 24.03.2023).}

_{⁵ Defence Exports Have Grown by 334% in Last Five Years, Says Rajnath // The Hindu. October 25, 2021. URL: https://www.thehindu.com/news/national/defence-exports-have-grown-by-334-in-last-five-years-says-rajnath/article 37167195.ece (accessed: 24.03.2023).}

_{⁶ Aim to Achieve $25 Billion in Defence Production and 5 Billion Exports by 2025: Rajnath Singh // The Times of India. February 5, 2021. URL: http://timesofindia. indiatimes.com/articleshow/80705233.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst (accessed: 24.03.2023).}

_{⁷ Chander S. India’s Defence Exports. Status, Strategy and Solution // Manekshaw Paper. 2019. No. 83. P. 17, 22. URL: https://www.claws.in/static/India%E2%80%99s-Defence-Exports.pdf (accessed: 05.04.2023).}

_{⁸ Kaura P. MSMEs Can Boost India’s Defence Exports with Policy Support // The Economic Times. February 4, 2017. URL: https://economictimes.indiatimes.com/small-biz/sme-sector/msmes-can-boost-indias-defence-exports-with-policy-support/articleshow/56967358.cms (accessed: 05.04.2023).}

_{⁹ The Defence Procurement Procedure 2016. Capital Procurement // Ministry of Defence of India. 2016. URL: https://www.mod.gov.in/sites/default/files/dppm.pdf_0.pdf (accessed: 05.04.2023).}

_{¹⁰ Draft Defence Production Policy 2018 // Ministry of Defence of India. 2018. P. 4. URL: https://www.ddpmod. gov.in/sites/default/files/Draft%20Defence%20Production%20Policy%202018%20-%20for%20website.pdf (accessed: 05.04.2023).}

_{¹¹ Chander S. India’s Defence Exports. Status, Strategy and Solution // Manekshaw Paper. 2019. No. 83. P. 17. URL: https://www.claws.in/static/India%E2%80%99s-Defence-Exports.pdf (accessed: 05.04.2023).}

_{¹² Rajiv S. S. C. Promoting Defence Exports // IDSA. March 31, 2021. URL: https://idsa.in/idsacomments/ promoting-defence-exports-sscrajiv-310321 (accessed: 05.04.2023).}

_{¹³ Chander S. India’s Defence Exports. Status, Strategy and Solution // Manekshaw Paper. 2019. No. 83. P. 18. URL: https://www.claws.in/static/India%E2%80%99s-Defence-Exports.pdf (accessed: 05.04.2023).}

_{¹⁴ Rajiv S. S. C. Promoting Defence Exports // IDSA. March 31, 2021. URL: https://idsa.in/idsacomments/ promoting-defence-exports-sscrajiv-310321 (accessed: 05.04.2023).}

_{¹⁵ PM’s Address to the Nation on 12.5.2020 // PM India. May 15, 2020. URL: https://www.pmindia.gov.in/ en/news_updates/pms-address-to-the-nation-on-12-5-2020/ (accessed: 05.04.2023).}

_{¹⁶ Defence Acquisition Procedure 2020 // Ministry of Defence of India. 2020. URL: https://www.mod.gov.in/ sites/default/files/DAP2030new_0.pdf (accessed: 05.04.2023).}

_{¹⁷ Government Formulates Draft Defence Production and Export Promotion Policy 2020 // IAS Google.  August 4, 2020. URL: https://iasgoogle.com/current_affair/ news-information-bureau-4th-august-2020 (accessed: 05.04.2023).}

_{¹⁸ Seven New Defence Companies, Carved Out of OFB, Dedicated to the Nation on the Occasion of Vijayadashami // Press Information Bureau of Government of India. URL: https://pib.gov.in/PressReleasePage. aspx?PRID=1764148 (accessed: 05.04.2023).}

_{¹⁹ Lok Sabha Unstarred Question No. 3821 to be Answered on 25th March 2022 // Parliament of India. URL: https://sansad.in/getFile/loksabhaquestions/annex/ 178/AU3821.pdf?source=pqals (accessed: 05.04.2023).}

_{²⁰ Cowshish A. Positive Indigenisation Lists and the Truth About India’s Self-Reliance in Defence Equipment // The Wire. August 31, 2022. URL: https://thewire.in/ government/positive-indigenisation-lists-india-self-reliance-defence-equipment-truth (accessed: 05.04.2023).}

_{²¹ Grevatt J. India Confirms 44 Defence Joint  Ventures // Janes. March 11, 2021. URL: https://www.janes.com/defence-news/news-detail/india-confirms-44-defence-joint-ventures (accessed: 05.04.2023).}

_{²² India — Russia Joint Venture Hopes for $5 Bln in Supersonic Missile Exports by 2025 // Reuters. October 18, 2022. URL: https://www.reuters.com/business/ aerospace-defense/india-russia-joint-venture-hopes-5-bln-supersonic-missile-exports-by-2025-2022-10-18/ (accessed: 05.04.2023).}

_{²³ Another Jet Engine Powers PM Narendra Modi’s France Visit After GE Deal in the US // The Economic Times. July 13, 2023. URL: https://economictimes. indiatimes.com/news/defence/another-jet-engine-powers-pm-narendra-modis-france-visit-after-ge-deal-in-the-us/articleshow/101726966.cms?from=mdr (accessed: 20.07.2023).}

_{²⁴ Bangladesh to Import Defence Items from India under $500-Million LoC // The Economic Times. December 16, 2021. URL: https://economictimes. indiatimes.com/news/defence/bangladesh-to-import-defence-items-from-india-under-500-million-loc/articleshow/ 88318484.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst (accessed: 05.04.2023).}

_{²⁵ Rajiv S. S. C. Promoting Defence Exports // IDSA. March 31, 2021. URL: https://idsa.in/idsacomments/ promoting-defence-exports-sscrajiv-310321 (accessed: 05.04.2023).}

_{²⁶ Chander S. India’s Defence Exports. Status, Strategy and Solution // Manekshaw Paper. 2019. No. 83. P.12–13. URL: https://www.claws.in/static/India%E2%80%99s-Defence-Exports.pdf (accessed: 05.04.2023).}

_{²⁷ Basu N., Philip Sh. A. Buy Weapons from Us, India Says as It Pushes Exports to Compete with China in Neighborhood // The Print. March 16, 2021.  URL: https://theprint.in/defence/buy-weapons-from-us-india-says-as-it-pushes-exports-to-compete-with-china-in-neighbourhood/622216/ (accessed: 05.04.2023).}

_{²⁸ The fiscal year in India starts on April 1st.}

_{²⁹ Record 75 Per Cent of Defence Capital Procurement Budget Earmarked for Domestic Industry in FY 2023–24, Announces Raksha Mantri at 14th Aero India // Press Information Bureau of Government of India. February 15, 2023. URL: https://pib.gov.in/PressReleasePage.aspx? PRID=1899388 (accessed: 05.04.2023).}

_{³⁰ Make-in-India Mega Deal: 83 Tejas Fighters Cleared for Air Force // The Indian Express. January 14, 2021. URL: https://indianexpress.com/article/india/make-in-india-mega-deal-83-tejas-fighters-cleared-for-air-force-7145472/ (accessed: 05.04.2023).}

_{³¹ Bikhchandani R. India 3rd Largest Military Spender, 50% Defence Exports Go to Myanmar, Shows  Data from SIPRI // The Print. April 26, 2022.  URL: https://theprint.in/defence/india-3rd-largest-military-spender-50-defence-exports-go-to-myanmar-shows-data-from-sipri/930570/ (accessed: 05.04.2023).}

_{³² Bhalla A. India Spending Less than 1% of Defence Budget on Research: Parliament Panel Raises  Alarm // India Today. March 16, 2022.  URL: https://www.indiatoday.in/india/story/india-spending-less-than-one-per-cent-of-defence-budget-on-research-parliament-panel-raises-alarm-1926233-2022-03-16 (accessed: 05.04.2023).}

_{³³ Bali P. Parliament Body Seeks More Funds for DRDO // Deccan Chronicle. April 9, 2023.  URL: https://www.deccanchronicle.com/nation/in-other-news/100423/parliament-body-seeks-more-funds-for-drdo.html (accessed: 20.04.2023).}

_{³⁴ Defence Gets Rs 5.94 Lakh Crore in Budget  2023–24, a Jump of 13% Over Previous Year // Press Information Bureau of Government of India. February 1, 2023. URL: https://pib.gov.in/PressReleasePage.aspx?PRID=1895472 (accessed: 20.04.2023).}

_{³⁵ Roy R. In Push to Reduce Imports, India Embraces Private Defense Startups // The Wall Street Journal. January 5, 2023. URL: https://www.wsj.com/articles/in-push-to-reduce-imports-india-embraces-private-defense-startups-11672928368 (accessed: 05.04.2023).}

_{³⁶ Budget 2022 Gives Boost to Domestic Defence Industry, 25% R&D Budget Earmarked for Indian Companies // India Today. February 1, 2022. URL: https://www.indiatoday.in/business/budget-2022/story/ boost-domestic-defence-industry-research-development-indian-companies-1907277-2022-02-01 (accessed: 05.04.2023).}

_{³⁷ Draft of Defence Production and Export Promotion Policy // Department of Defence Production, Ministry  of Defence of India. 2020. P. 17. URL: https://www.ddpmod.gov.in/sites/default/files/pdfupload/DraftDPEPP.pdf (accessed: 05.04.2023).}

_{³⁸ Defence Exports: Untapped Potential // KPMG.  June 2020. P. 11. URL: https://aidat.in/wp-content/ uploads/2020/08/Point-of-View-on-Defence-Exports.pdf (accessed: 05.04.2023).}

_{³⁹ Manufacturing, Value Added (% of GDP) — India // The World Bank. URL: https://data.worldbank.org/ indicator/NV.IND.MANF.ZS?locations=IN (accessed: 05.04.2023).}

_{⁴⁰ Mohan D. India’s Manufacturing Growth Slowdown a Decadal Problem // The Wire. December 7, 2022. URL: https://thewire.in/economy/indias-manufacturing-growth-slowdown-a-decadal-problem (accessed: 05.04.2023).}

_{⁴¹ ‘Clear Manifestation of India’s Talent’: PM Modi On Defence Exports Reaching All-Time High // ETV Bharat. April 1, 2023. URL: https://www.etvbharat.com/ english/bharat/india-defence-exports-reach-all-time-high/na20230401204932435435025 (accessed: 05.04.2023).}

_{⁴² India Is No Longer in the List of Top 25 Arms Exporters: SIPRI // The Wire. April 10, 2023. URL: https://thewire.in/government/india-defence-top-25-arms-exporter-sipri (accessed: 05.04.2023).}

_{⁴³ Draft Defence Production Policy 2018 // Ministry of Defence of India. 2018. P. 4. URL: https://www.ddpmod. gov.in/sites/default/files/Draft%20Defence%20Production%20Policy%202018%20-%20for%20website.pdf (accessed: 05.04.2023).}

About the authors

Kirill A. Likhachev

Author for correspondence.
Email: likhachevkirill@gmail.com
ORCID iD: 0000-0003-3017-4194
SPIN-code: 7962-9650

PhD (History), Associate Professor, Department of Theory and History of International Relations

References