Strategy for Defence Exports (SDE): A Step Towards Improving India�s Balance of Trade

In a bid to become an influential power in the world and particularly in the South Asia region, India aspires to achieve self-reliance in core sectors including defence. The government is taking substantive steps towards establishing a strong defence industrial base in the country with world class manufacturing capabilities leading to strong export possibilities. The recently launched multi-sectoral “Make in India” programme, a flagship scheme of the Prime Minister is witness to the intent and efforts of the policymakers in this regard. A major challenge towards implementing Make in India in the defence sector is that of business sustainability. Technology development and production is at the fulcrum of indigenisation in defence, however from the economic point of view, it is essential to reap capital benefits from the technology developed and weapon systems manufactured in the shortest time frame possible. Export of defence equipment and systems is important for a country to improve its balance of trade and increase its GDP and India is no exception.

The formulation of the Defence Export Strategy is a welcome and much needed step towards encouraging and facilitating military exports. The Department of Defence Production (DDP) released the Strategy for Defence Exports (SDE) under the purview of Foreign Trade Policy (FTP) to develop procedures and mechanisms for export of defence products and services. This is accompanied by simpler procedures for issuing No Objection Certificates (NOC) for export of military stores. For transparency and efficiency, a web-based time-bound system would be introduced for issuing NOCs to the public and private companies. The strategy report states that a new Defence Exports Steering Committee (DESC) will be constituted along with a national defence export facilitation body. The DESC will be chaired by the Secretary, DDP with representation from Ministry of External Affairs (MEA), Directorate General of Foreign Trade, Acquisition Wing, Defence Research and Development Organisation (DRDO) and the Armed Forces. The committee will examine requests on case to case basis, provide permissions depending on criticality and sensitivity of equipment, monitor the progress of exports, and give suggestions on boosting exports. In an effort to incentivise and promote exports, a procedure to finance exports to weaker countries will be put in place for enabling better buyer power. Additionally, the Line of Credit facility extended by the MEA would also be used to leverage exports and build the brand equity of Indian defence exports in the world.

The SDE report suggests that Indian embassies and missions abroad would assist in marketing and promoting Indian defence articles to willing buyers vigorously. In consultation with the MEA and MoD, the list of military technologies and equipment for export will be finalised to address the issue of ambiguity. Permission for export of critical, strategic and sensitive weapons will be granted by the Defence Minister on a case to case basis. The Government also stated that the defence offset policy will be reviewed for alignment with the export policy. An export promotion body will be set up that will provide advisory support on export related issues and coordinate the export facilitation schemes of the Government. The body will also be responsible for identifying suitable markets in consultation with the MEA and Ministry of Commerce. Government officials have stated that a programme to encourage growth in Indian defence exports is likely to be included in the latest Defence Procurement Procedure which is currently being reviewed and will be released in 2015, possibly as early as January. The bringing in of expertise, framing of time bound procedures and transparent accountability mechanisms by the government are the much-needed steps for invigorating the Indian defence sector.     

In order to attract the foreign market, the DRDO is also working on a weapons export plan. As the Government is focused on defence indigenisation and exports, DRDO has identified 15 weapon systems that it could export to other countries including short-range missiles such as Astra air-to-air missile (AAM), Prahar surface-to-surface missile (SSM) and Akash surface-to-air missile (SAM). In addition, Tejas Light Combat Aircraft, Brahmos cruise missile, Arjun Mk-II tanks, unmanned systems and radars have been identified for possible export. The success of India’s Mars Orbiter Mission (MOM) is testament to scientific and technological potential that India possess, but needs to harness desperately. The success of ISRO, missile variants by DRDO and ICT advancements coupled with a large trained cost-effective manpower are a once in a lifetime chance for India to exploit and reap the benefits of the economic opportunity presented.    

The SDE policy is a practical document for promoting exports and contributing to the GDP of the economy through enhanced defence exports. However, the implementation of the plan is a daunting task that needs thorough planning, strategising, wider vision and scoping, tough mechanisms, transparency and strict monitoring. Implementation has generally been India’s Achilles heel when it comes to policy success. Challenges pertaining to time delays, budget overruns, red tape and corruption will need to be addressed by the current government which by its share majority in the lower house is in a position that possibly no Indian government has been in the last 30 years. Probity and checks and balances need to be in place for effective evaluation of the defence export programme. India cannot afford to miss the opportunity presented to it, as the costs of failure now are greater than ever.

The author is a former Research Assistant at CLAWS. Views expressed are personal.