Inside India’s Defence Sector’s Explosive ATMANIRBHAR Story

By R. Anil Kumar

• Prime Minister Narendra Modi recently declared his intent towards making India a net- exporter of defence products over the next five years.

• PM Modi’s strategic vision aims for India to emerge as the third-largest economy globally and as a first-rung global military power during his potential third term.

• India’s ‘Make in India’ defence production success story is evident in record-breaking defence exports, reaching Rs. 21,083 crore (approximately $2.63 Billion) in 2023-24, a growth of 32.5% from the previous fiscal. With a focus on indigenisation, India aims to triple annual defence production by 2028-29 and double defence exports to Rs. 50,000 crore (approx. $ 5 Billion).

Bengaluru, April 6. Prime Minister Narendra Modi has recently declared his intent towards making India a net-exporter of defence products over the next five years.

PM Modi’s strategic vision aims for India to emerge as the third-largest economy globally and as a first-rung global military power during his potential third term.

In less than a decade, India not only indigenised the manufacturing of a very large number of defence items but also turned into an arms exporter.

The ‘Make in India’ programme, an initiative of Prime Minister Narendra Modi has nowhere reflected so successfully as in defence production.

In less than a decade, India not only indigenised the manufacturing of a very large number of defence items but also turned into an arms exporter. A striking feature of this success story is that public-sector units (PSUs), which had become known for inefficiency and tardiness, have played a great role in this Journey of Atmanirbhar Bharat.

The soaring numbers

A few days ago, Defence Minister Rajnath Singh congratulated all stakeholders on crossing a big milestone in defence exports: India’s defence exports have touched a record Rs. 21,083 crore (approximately $2.63 Billion) in the financial year 2023-24, a growth of 32.5% over the last fiscal when the figure was Rs. 15,920 crore ($ 1.81 Billion).

This explosive growth is fuelled by a strong indigenisation push by the government aimed at achieving self-reliance in defence when India seeks a bigger strategic role for itself in the world even as it races to become the world’s third-largest economy. The rapid growth in defence manufacturing and exports have powered many PSU defence stocks to new highs.

Though the private sector has led the growth, defence PSUs too have made significant contributions. The private sector and the PSUs have contributed about 60% and 40% respectively.

In addition, there has been a rise in the number of export authorisations issued to the defence exporters during 2023-24. From 1,414 export authorisations in 2022-23, the number jumped to 1,507 in 2023-24.

Achieving Atmanirbharta in Defence sector

India is building a gargantuan defence-industrial complex, which includes large corporates such as L&T, Godrej and Adani to PSUs, startups and research bodies, and manufactures from ballistic missiles such as BrahMos and fighter jets to artillery shells and night-vision devices.

Achieving self-reliance in defence and reducing import dependency for military hardware is important for India to maintain its strategic autonomy.

India, which is now flexing its diplomatic muscles at the international stage to pursue an assertive foreign policy, defence indigenisation is all the more important. That’s what Prime Minister Narendra Modi’s Atmanirbhar has set out to achieve.

India is lowering its dependence on foreign suppliers through a mix of policy initiatives that tap into design and manufacturing capabilities of public enterprises, large business conglomerates and even startups.

Two major policy initiatives are the notification of positive indigenisation lists and earmarking 75% of the capital acquisition budget for procurement from local companies. The government has given approval to nearly 45 companies, joint ventures operating in the defence sector with foreign OEMs (original equipment manufacturers), in addition to launching the Innovations for Defence Excellence (iDEX) scheme which aims to create an ecosystem which fosters innovation and encourages technology development in defence by engaging R&D institutes, academia, industries, start-ups and even individual innovators.

Out of 4,666 defence items, including assemblies, sub-assemblies, raw materials, critical spares and components, which were listed for indigenisation, 2,920 items have already been indigenised. 40 to 50 licences are issued every year in defence production.

Among the major defence items being exported, besides the big-ticket BrahMos missiles systems, are Dornier-228 aircraft, ALH helicopters, SU avionics, artillery guns, radars, armoured vehicles, rockets and launchers, torpedo loading mechanism, alarm monitoring & control systems, night- vision monocular and binocular, lightweight torpedo and fire-control systems, weapons-locating radar, HF radio, Kavach MOD, drones, artillery systems and explosives, and coastal surveillance radars.

The government aims to nearly triple India’s total annual defence production to Rs. 3 lakh crore (approx. $ 30 Billion) by 2028-29.

The target for defence exports is more than double at Rs. 50,000 crore (approx. $ 5 Billion) as against Rs. 21,083 crore (approx.$2.63 billion) at present. The target for 2024-25 is Rs. 1,75,000 crore (approx. over $ 15 Billion) worth of total annual defence production, which would include exports worth ₹35,000 crore (approximately over $ 3 Billion).

India has been in overdrive to sell its indigenously built light-combat aircraft Tejas, manufactured by state-owned Hindustan Aeronautics Limited (HAL).

This one item can lift India’s exports to a very high level and put India into an exclusive club of countries that export fighter jets. The frantic search for Tejas customers continues as India tries to boost its defence exports and build relations with many countries in order to consolidate the Global South.

A few days ago, India delivered HAL 228 aircraft to the defence forces of Guyana.

Defence Minister Rajnath Singh had said recently that India is looking to export fighter jet engines in the future. He referred to the engine manufacturing agreement between GE Aerospace and Hindustan Aeronautics for the GE 414 engine that will power future variants of the Tejas.

According to a report by brokerage house Jefferies India, with an estimated domestic defence opportunity ranging between $100-$120 billion over the next five-six years, the sector anticipates a visible 13 per cent industry Compound Annual Growth Rate (CAGR) from FY23 to FY30.

The export defence opportunities are projected to witness a commendable 21 per cent CAGR from FY23 to FY30.

Moreover, the Indian government’s concerted efforts to bolster country-to-country relations aimed at promoting exports add another layer of buoyancy to the sector’s prospects.

Jefferies anticipates further upside in stocks like Hindustan Aeronautics (HAL), Data Patterns and Bharat Electronics (BEL).

Despite these projections, certain risks loom over the sector, including technology obsolescence and management bandwidth constraints, said the report.

However, with prudent strategies and robust government support, India’s defence sector appears poised for exponential growth, driving both economic and strategic advancements.