India is advancing towards its ambitions in the domestic and global defence ecosystem. But it must build towards this over time while fulfilling immediate military capability needs along contested borders. Examples of other industries, including electronics and semiconductors, show the power of partnerships with like-minded countries in accelerating progress towards our self- reliance goals.
The US is a crucial partner, accounting for over 50% of India’s defence exports. US firms have committed significant manufacturing and R&D investments in India, including through partnerships with India’s private sector and defence public sector undertakings (DPSUs). Simultaneously, the recent signing of the Security of Supply Arrangement (SOSA) and the ongoing 20th edition of Exercise Yudh Abhyas and the evaluation of the Stryker infantry combat vehicles and Javelin anti-tank missile for co-production continues the unprecedented momentum in bilateral defence relations.
While this trend might appear to run counter to GoI’s ambition for indigenously developed defence articles, it demonstrates the power of partnerships in addressing India’s security requirements while also building domestic capacity and participation in GVCs and exports. GoI could take steps to supercharge this progress.
New Delhi could continue reforming India’s Defence Acquisition Procedure (DAP). The defence ministry could adopt strategies to address tech advancements, procurement processes, logistics support, industrial relationships and international collaboration related to capability development. A recent US-India Business Council-The Asia Group paper proposes the following key priorities:
Map requirement
Establish a more integrated defence planning dialogue with the industry that periodically identifies capability gaps and opportunities, including in specific platforms, subsystems and even components, providing predictability for military needs and business planning.
Push R&D
Introduce incentives and capital subsidies for R&D and manufacturing, and allocate funds for competitive prototyping to reduce risk.
Simplify processes
Streamline procurement categories in DAP to reduce complexity, coupled with graded incentives for indigenous design and content.
Enhance competition
Review nomination of orders to DPSUs to enhance global competitiveness, including for India’s private defence industry.
Among India’s numerous defence relationships, the bilateral with the US and mini-lateral with Quad partners, have grown highly significant, rooted in shared concerns over China’s aggression. Facilitating quicker growth of industrial linkages with the US and other like-minded countries can help address India’s defence procurement challenges, reduce risk, and promote knowledge transfer and skill development.
Announced during Narendra Modi’s 2023 state visit to the US, the India-US Defence Acceleration Ecosystem (INDUS-X) offers a promising approach that addresses immediate and long-term needs. Supported by the new defence industrial roadmap framework, INDUS-X is fostering partnerships between Indian startups and US prime contractors. These collaborations can leverage the expertise of established firms to deliver capabilities quickly, enhancing both countries’ defence technological prowess in balancing China in the Indo-Pacific.
JVs, please
Identify critical defence and strategic capabilities and incentivise JVs in these areas, which will enable domestic participants to develop core competencies with high-priority systems and capacities. Maintenance, repair and overhaul (MRO) capacities stand out as a key priority area that can leverage bilateral and multilateral partnerships. Exploring market carveouts with like-minded countries for platform-specific MRO capacities would help to create the necessary economies of scale, enabling industry to align its investment decisions.
New markets
Defence ministry must lead initiatives to catalyse third-country exports, particularly in large EMs in Asia, Africa and Latin America. Some measures could involve a well-defined export policy and reformed export controls, bilateral lines of credit to build third-country defence capacity, and easier access to export financing.
India’s defence sector is poised to capitalise on initiatives like SOSA, INDUS-X and a potential Reciprocal Defence Procurement Agreement. The defence ministry could enable the sector’s lift-off through further reforms to its extant acquisition procedures and integrating lessons learnt from past programmes, the experiences of other ministries and global examples, successful and otherwise. The domestic and geopolitical circumstances for urgent reform and growth are strong, rare and fleeting.
(Das is director, aerospace and defence, US-India Business Council,and Nadadur is VP, South Asia,The Asia Group)
