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Growth challenges for India’s defence manufacturing sector


IAF promotes ‘Make in ' via targeted, sustainable indigenization

By Girish Linganna

The Indian defence manufacturing sector has advanced significantly, largely due to the government's ‘Make in India' policy and emphasis on self-sufficiency. But difficulties that can hinder development in 2024 need to be addressed. So like all significant nations, India has an Army, Navy and Air Force and these wings need among other essentials, ground vehicles, naval vessels, C4ISR, fixed-wing aircraft, rotary-wing aircraft, weapons and ammunition, protection and training and unmanned systems.

The Indian defence market is growing. It is expected to increase at 4 percent annually. India's rivalry with China needs constant modernization of military equipment, cutting imports and market growth. Geopolitical tensions—as well as terror threat perceptions—have pushed India to expand its perimeter, security, naval and aviation capabilities. The country's defence has steadily expanded.

Military budget for 2024 could be $84 billion—a whopping 13 percent rise from 2023. This increase will support market expansion over the projection period. Also, with the ‘Make in India' initiative, India seeks self-sufficiency in defence and allied areas, thereby opening up new prospects for market players.

The increased emphasis on modernizing aircraft capabilities will stimulate segment growth—including HAL Tejas LCA Mk-1A, Dornier 228, HAL Dhruv ALH/Rudra and HAL Light Combat Helicopter deliveries. India's initiatives in manufacturing and operational self-sufficiency generate considerable opportunities for regional suppliers. India will keep spending on AMCA, LCA Mk-2, 3-ton-class Indian Multi-Role Helicopter and AWACS.

The Indian Air Force will buy 114 Medium Multi-Role Combat Aircraft (MMRCA) worth approximately $18-$20 billion. The IAF wants to keep expanding its air defence capabilities and invest in key capabilities by obtaining local and foreign-produced systems—such as Akash SAM, S-400 and MRSAM IAI. Such programmes will support segment growth.

The Ministry of Defence had an exceptional year in 2023, experiencing a sharp rise in defence exports— an unparalleled $1.95 billion, nearly $365 million more than in the previous year. Simultaneously, defence production surpassed the milestone of $12.2 billion for the first time. The Indian government has set a target of $25 billion in defence production by 2025, with $5 billion coming from exports.

Through Defence Public Sector Undertakings (DPSUs) and ammunition production factories, the Department of Defence Production (DDP) has created vast manufacturing capabilities for producing various pieces of defence equipment including heavy transport vehicles, weapons and ammunition, tanks, armoured vehicles, helicopters, fighter planes, military ships and submarines.

The IAF promotes ‘Make in India' via targeted, sustainable, established indigenization programmes. The current focus is on reducing reliance on imported defence technology. Light Combat Aircraft, Akash missiles and Advanced Light Helicopters (ALH) have all been introduced recently. It actively supports and closely coordinates with the Defence Ministry on LCH, RPA, medium-power radars, low-level tracking radars and other systems, its actions in line with that of the Defence Research and Development Organisation (DRDO).

The Strategic Partner Model also aligns with ‘Make in India. Shipyards have also followed the ‘Make in India' model. The Indigenous Aircraft Carrier (IAC)-1 is India's largest and most sophisticated military ship, built by Cochin Shipyard Limited. Submarines, destroyers, frigates, replenishment oilers, research vessels, diving support vessels and tugs are being built in India. Such advances will lead to increased indigenous development of various defence technologies.

The Indian defence market is moderately consolidated, with several prominent firms having market shares including Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL), DRDO, Rostec and Airbus SE. The ‘Make in India' policy has fostered the formation of partnerships between foreign and indigenous enterprises. This has enhanced the capacities of Indian companies. Recent partnerships have benefited HAL, Safran, Elbit Systems Ltd, Tata Motors, Bharat Forge, General Dynamics, Russian companies, L&T, Boeing and Mahindra.

India is also working to improve its domestic manufacturing capabilities to broaden the variety of local defence equipment it can make, and reduce reliance on foreign procurement. Some state-owned enterprises are developing indigenous technologies to boost local players' market share.

But there are issues galore! Imports, for example. India still relies largely on imports for vital defence technologies and components, notably high-end systems, such as fighter planes, submarines and missiles. Because of this reliance, India is subject to supply chain disruptions and geopolitical pressures.

Then there are infrastructure bottlenecks. The Indian defence manufacturing ecosystem is underdeveloped regarding infrastructure, such as testing facilities, production lines and trained labour. This might result in delays, inefficiencies and increased expenses.

Financial constraints: While defence spending is increasing, it remains restrained compared to that of other big powers. This reduces resources available for R&D, upgrading and procuring new technology. There are also bureaucratic obstacles which complicate and delay procurement, discourage private participation and hinder development and deployment of new technology. It is critical for speedier expansion to streamline the procurement process and reduce red-tape.

Attracting Private Capital: To close the technology gap and encourage innovation, the Indian defence sector needs to attract more private investment. Private players can be enticed by creating a suitable climate with clear policies, incentives and long-term contracts.

Skilled Labour Shortage: The Indian defence industry faces a skills deficit, notably in such fields as aeronautical engineering, cyber security and robotics. Investing in education and training programmes is critical for closing this gap.

MSMEs Integration: Micro, small and medium-size companies (MSMEs) can be important in supplying components and subsystems to bigger military manufacturers. However, properly integrating MSMEs into the supply chain necessitates improved access to money, technology and market opportunities.

Geopolitical Uncertainty: The current global geopolitical , including the war in Ukraine and tensions with China, can disrupt supply chains and raise the cost of defence equipment. India must establish alternative sources for vital technology and minerals to offset these risks.

Threats to Cyber Security: Cyber attacks on the defence sector are becoming more common, with the potential to disrupt operations and compromise sensitive data. Strong cyber security measures are crucial to safeguarding key infrastructure and information.

Cost-Quality Balance: While cost-effectiveness is critical, sacrificing quality can have major implications for security. Finding the correct mix between price and performance is a major problem for India's defence industry.

Addressing these difficulties requires a collaborative effort by government, industry and academia. India can build a robust and self-sufficient military manufacturing ecosystem that can satisfy the country's strategic demands in the coming years by investing in infrastructure, technology and people resources.


 (The author is a Defence, Aerospace & Political Analyst based in Bengaluru.)




The Northlines is an independent source on the Web for news, facts and figures relating to Jammu, Kashmir and Ladakh and its neighbourhood.

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