India: From consumers to producers in the defence arena

The land of great consumption is making inroads in its bid to also become the land of great production across sectors. Defence is one of them. India is using a mix of contract manufacturing, purchase offsets and indigenisation to ramp up exports. Its place at the top of the list of ‘boys with toys’ and an ambitious drive to reduce import dependency are working to its advantage. Improving fiscal health favours higher allocations to spending on equipment over salaries. This contributes to the emergence of a stronger domestic military-industrial complex, especially with policies promoting private sector participation in defence procurement. This confluence of several long-term trends is likely to keep improving India’s position in the global arms trade as it climbs the value chain towards developing weapons systems at home.

Strategic considerations also work to India’s advantage. It has to maintain a large military presence against threats in its neighbourhood, which sets out its need for hardware. But New Delhi can use its largely ‘non-aligned’ foreign policy further afield to push sales. It also enjoys labour cost advantages that render its defence exports competitive. Modern conflict is spread over a larger global canvas that lowers entry barriers to the armaments industry. India has established strengths in software, which is shaping the nature of autonomous weapons.

India’s emergence as an arms exporter – to the US, France and Armenia, among others – coincides with a fractured geopolitical situation where supplies are being affected by Western sanctions against Russia. China doesn’t seem to be making much headway in selling arms. A crop of alternative exporters, including South Korea and Turkiye, is visible. India expects to find a place among them. The differentiators, of course, are India’s economic heft and its strategic compulsions that will keep its defence budget oversized relative to its competitors. Its equation with China makes India a reliable vendor to the US, the world’s largest arms dealer, key to India’s ambitions.

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