Transforming India into a Defence Export Powerhouse

12th August 2019
Alex Lynn

As a nation seeking to achieve self-reliance across defence segments by 2025, India presents a complex case of procurement and industry. For the past few years, policy and action were oriented toward increasing indigenous defence industrial capabilities through foreign original equipment manufacturer (OEM) linkages. 

This is a time-consuming process, but while the indigenous industry’s manufacturing and research and development (R&D) capabilities slowly build up, India must simultaneously construct an environment that facilitates defence export growth. SIPRI estimates indicate that over the past decade, India contributed to less than 0.1% of global defence exports, a figure that must be improved. 

It’s not that the country does not produce quality products; Indian defence electronics find their way into some of the most complex defence subsystems and platforms in the world today. However, there are fewer institutional mechanisms to promote exports and build the Indian brand compared to global defence majors—an area where interventions are required immediately.

Defence exports are a testament to a nation’s technological prowess and the proficiency of its industry. They are also valuable foreign exchange earners and key tools of geopolitical engagement. These are some of the drivers that propel India to transform itself from a majority importer of defence equipment into a self-reliant net exporter. To convert these drivers into results, India has two paths.

The first one is the long road, where new government policies are formulated, new industry engagements are initiated, engagements are analysed post-initiation and then course-corrected following the analysis. The problem with this pathway is that it takes a substantial investment of time to deliver, and India does not have the luxury of time to stay competitive in the global defence market.

This brings us to the second path, a shorter and smarter approach that involves understanding the best practises of nations that have facilitated the establishment of leading defence companies with considerable exports and adapting them to the Indian milieu to leapfrog ahead. Frost & Sullivan, through this brief, explores this pathway in terms of enhancing and sustaining India’s defence exports.

Simplifying regulatory processes and permits for defence exports

Regulation in defence exports is a multi-stakeholder process due to the sensitive nature of equipment. In India, exporters of lethal equipment need permissions from institutions such as the Concerned Service Headquarters, Ministry of External Affairs, Planning & Cooperation Wing (Ministry of Defence), Defence Research & Development Organisation, Department of Space and Indian Space Research Organisation. 

The Department of Defence Production coordinates the process. Submitting applications to multiple bodies, located at different locations and having differing mandates, is not the most efficient way to meet this objective. This is where France—one of the world’s leading defence exporters—stands out.

In France, the Inter-ministerial Commission for the Study of Military Equipment Exports (CIEEMG), a permanent body composed of representatives of ministries of defence, foreign affairs, economy and finance, screens and gives recommendations on permitting individual and global defence export licenses. The prime minister approves the recommendation of the CIEEMG or if the CIEEMG members cannot reach a consensus, a decision is made directly by the Prime Minister’s Office. 

This centralised decision-making coupled with the establishment of the générale de l’armement (DGA) in the early 1960s accelerated the nation’s exports. The first decade of functioning of the DGA-CIEEMG combine (1961-71) saw French exports increase by 140%. France’s integrated approach toward exports has cut multiplicity of channels between stakeholders and led to specialisation. This permanent inter-ministerial engagement has enabled it to continuously refine its defence policies and processes.

As India expands its participation in global export control regimes, it needs to balance speedy export permission with strong non-proliferation and control. Here again, the French defence export system provides a model in maintaining a simple regulation system while not compromising on multilateral export control commitments. The French have done this by making it incumbent on the exporters to make periodic submissions of export and delivery details and also putting in place strong ex-post-facto controls involving the DGA and Ministry of Customs. 

Exporting companies are required to send biannual reports to the Ministry of Defence (MoD), listing the equipment orders and the deliveries made for verification. Their customs department is also empowered to initiate control procedures; these may include interviews, seizure of documents, visits to company premises, recognition of an infringement or sanctions. 

This approach could prove useful to India in case of export of Non-Appendix II Munitions as government resources will be freed up and Indian OEMs get a certain degree of freedom because of a shift from external case-by-case regulation to batch processes, self-declaratory compliance and periodic checks.

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