In push to be defence manufacturing hub, India builds up ecosystem for local arms producers and start-ups

NEW DELHI: India is betting on its local weapons manufacturers, including budding start-ups, to modernise its army and become a defence export hub.

It is a dramatic shift for a country that has for decades been one of the world’s biggest arms importers. 

Earlier this year, India’s Prime Minister Narendra Modi announced the country’s bid to become the world’s largest defence manufacturing base. 

His government plans to raise defence exports by US$5 billion over the next two years. 

INDIA’S ABILITY TO PRODUCE COST-EFFECTIVE HARDWARE

Observers said this is welcome news for India’s defence start-ups, giving them some optimism for long-term growth. 

Mr Aman Johri, chief executive officer of Mumbai-based manufacturer Jatayu Unmanned Systems, believes the country is ready to shift roles. 

“We can offer a hub of manufacturing; we can offer a hub of innovation and technology development,” said Mr Johri, an aeronautics engineer by training. 

“There’s an ecosystem here as well, which makes India a favourable country for export orders.”

Analysts believe the ability to produce cost-effective equipment makes India a solid defence partner for developing economies in Asia and Africa.

According to the government’s own figures, India’s defence exports for the fiscal year between 2021 and 2022 have hit an all-time high of about US$1.95 billion, an increase of more than 10 times in six years, with sales going to more than 70 countries.

GROWING ROLE OF INDIA’S DEFENCE START-UPS

Experts highlighted that this is a sign of the growing role that India's nearly 200 defence start-ups are playing in developing its military capabilities. 

The country’s defence sector is dominated by state-owned companies such as the Hindustan Aeronautics Limited. which makes the Tejas light-combat fighter jets, and at least a dozen other big public sector units.

With the government easing entry barriers into defence production, private players are also now jumping in.

But some analysts believe there remains a place for start-ups. 

“Whether it is drones or AI (artificial intelligence) or robotics, these are the things that are done better by the start-ups,” said retired Lieutenant General Satish Dua, a former chief of Integrated Defence Staff with the Indian Armed Forces. 

“On the other hand, there are several critical components of larger systems and platforms also which fit the role of being developed by start-ups.”

Lt Gen (Ret) Dua said officials are looking to bank on start-ups to acquire cutting-edge defence technology.

These firms could help India on the journey to become more self-sufficient, and possibly reduce the reliance on arms from suppliers such as Russia, France and the United States. 

FUNDING CRUNCH, LONG PROCUREMENT DELAYS

According to the Stockholm International Peace Research Institute’s arms transfer report, India was the world’s largest arms importer from 2018 to 2022, accounting for 11 per cent of global arms imports.

But when it came to the ranking of top arms exporting nations last year, India was ranked 41th.

India’s Defence Ministry said it will now spend three-quarters of its procurement budget to buy from local manufacturers. 

However, analysts noted that the country’s private defence players may have to cross a few hurdles, including a funding crunch and long procurement delays.

Even for companies that already have government contracts, generating revenue can take a while, they added. 

“I have sat on the defence acquisition council myself. Our procedures, our defence acquisition procedures are very painful, very tedious,” said Lt Gen (Ret) Dua. 

“But that’s another way of saying it. It’s also a backhanded compliment, because they are also very thorough.”

For now, the Indian government has launched start-up incubators to help with the funding. 

It has also set up a fast-track procedure to cut down acquisition times from a year to just two to three months.