The emergence of evidence of a rise in Indian defence exports, also accompanied by a decline in imports, is a welcome development though the reasons for both are not identical. Based on the latest estimates released by the Stockholm International Peace Research Institute (SIPRI) in the period between 2009-13 and 2014-18, Indian defence imports fell even as exports increased.
Broadly, two factors appear to be driving this shift. The first is the ‘Make in India’ initiative, as part of which a number of components from Indian private and public sector enterprises have been prioritised by the government. The second set of factors is extraneous to India in the form of delays in supplying equipment by vendors and the outright cancellation of contracts by the Indian government or at least a diminution of existing contracts.
Under the Narendra Modi government’s ‘Make in India’ initiative, the Defence Procurement Procedure (DPP) lays out the terms, regulations and requirements for defence acquisitions as well as the measures necessary for building India’s defence industry.
It created a new procurement category in the revised DPP of 2016 dubbed ‘Buy Indian Indigenously Designed, Developed and Manufactured’ (IDDM). The ‘Make’ procedure has undergone simplification “earmarking projects not exceeding ten crores” that are government funded and ₹3 crore for Micro, Small and Medium Enterprises (MSMEs) that are industry funded.
In addition, the government has also introduced provisions in the DPP that make private industry production agencies and partners for technology transfers. Small and Medium Enterprises (SMEs) until 2016 accounted for a 17.5% share of the Indian defence market.
According to government of India data for the financial year 2018-19, the three armed services for their combined capital and revenue expenditures sourced 54% of their defence equipment from Indian industry.