Asia

India, world's second-largest arms importer, moves to boost domestic weapons industry

NEW DELHI – India’s announcement of a ban on the import of 101 items of military equipment has been widely welcomed in the country, but experts say it is a move fraught with risks in the medium term.

Military preparedness and modernisation are crucial to India amid border troubles with China and Pakistan.

In the latest skirmish with China, 20 Indian soldiers were killed in clashes with Chinese troops along a disputed border in the Himalayan region. An unknown number of Chinese soldiers were killed with the two countries still negotiating a disengagement of forces along certain sections of the border in Ladakh region.

Defence minister Rajnath Singh on Sunday (Aug 9) announced an import ban on 101 items, which will come into effect between 2020 and 2024, and has indicated he would add more items to the list.

He also announced a budgetary allocation of 520 billion rupees (S$9.5 billion) for domestic procurement this year.

India has traditionally relied on Russia for weaponry but has been diversifying over the years, sourcing defence systems and weapons from countries such as the United States and Israel.

Nearly one-fourth of the items on the list are already being made in India, but experts said domestic arms makers will need time to step up.

The items range from small weapons to larger and more complex systems such as towed artillery guns, short-range surface-to-air missiles, long-range land attack cruise missiles and lightweight rocket launchers.

Mr Pushan Das of the Delhi based think-tank Observer Research Foundation said: “The list may inadvertently hamstring military planning in the short or medium term. It does not seem to have taken into consideration entry barriers in the form of required knowledge, skill and manufacturing capacity of major defence systems.”

Mr Ajey Lele, a senior fellow at Manohar Parrikar Institute for Defence Studies and Analyses, cited costs as a possible issue, especially during the initial phases of research and development.

However, he added: “It is a much required step from the point of view of developing India’s own defence industry and reducing the huge level of dependency on imports. Also, it offers clarity to the armed forces also and they can plan accordingly.”

Over the longer term, he said, going domestic should become a cost-effective option.

India is the world’s second-largest importer of defence equipment behind Saudi Arabia.

India’s military expenditure in 2019 grew by 6.8 per cent from the previous year to US$71.1 billion (S$97 billion), according to the Stockholm International Peace Research Institute. Over half of the expenditure is on imports. India’s defence budget this year was US$66.9 billion.

The move ties in with the push for domestic manufacturing in defence, a goal of successive governments.

Recent efforts have focused on pushing foreign firms to manufacture in India. Russia, for instance, is co-producing AK-203 assault rifles with India.

The import ban is part of a recent raft of defence reforms and comes on the back of a renewed push for domestic manufacturing, which has acquired urgency due to the onset of the coronavirus pandemic which disrupted global supply chains.

In May, as part of the economic stimulus package, the government announced that foreign direct investment limit in defence production would be increased from 49 per cent to 74 per cent.

Further incentives would be needed to ensure manufacturers do the job well, said retired Indian army lieutenant-general H. S. Panag.

“The corporate sector has to be given incentives. They must be given defence loans or loans only for the defence sector. If you are manufacturing a Humvee armoured protective vehicle for the army, the army order would be limited. So the same plant can also produce civilian versions of the same machine. These kinds of incentives should be there. Otherwise we might be saddled with poor quality,” said Mr Panag, who said the import ban was a good move for India.

He added: “We need to indigenise the entire process. If you want to call them Make in India, you must make them 100 per cent, not 50 per cent or partially assembling, in India. That’s the challenge.”

India has had some domestic successes in the defence industry.

Hindustan Aeronautics developed Tejas, a light combat aircraft, which was first inducted into the Indian Air Force in 2016.

India also developed the BrahMos, a supersonic missile system, and has been able to build submarines.

The domestic industry will be able to build on its successes, its players said.

Mr S.P. Shukla, chairman of Mahindra Defence, known for its armoured vehicles, said the import ban would “help in creating a vibrant defence manufacturing ecosystem in India”.

He added that the 520 billion rupee budget for domestic procurement will help industry players in their capital expenditure and capacity plans.

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