2 months ago
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In a recent speech, Defence Minister Rajnath Singh estimated exports in the sector at Rs. 50,000 crore five years from now. That gives rise to the question, where do we stand now and what will get us to this target?
If you have read a bit about wars, you may have noticed that countries that have a strong manufacturing base tend to be significant arms producers as well. Think Germany, Russia, France, the US...
In fact, right now there are some nice little dynamics playing out in the trade war between Europe and China. As writer Noah Smith noted in a recent blog, China is subsidising the production of electric vehicles while Europe, in its intent to go Green, is subsidising the consumption of these vehicles. So, he argues, it stands to reason that China will attract a lot of the manufacturing investment from companies that are keen to sell in Europe. In other words, European carmakers could potentially move to China.
And why doesn’t Europe like it one bit? Several reasons here but a key one being national security. He says if US domestic politics causes it to abandon the Ukrainian cause in the war against Russia, that burden could fall upon Europe, which could feel more threatened if Putin “turns his eye to Poland and the Baltics”. Which means Europe needs to match Russia’s war production.
As we noted at the beginning, a thriving domestic industry would give a country the flexibility to use production lines to ramp up defence output when needed. If European auto industry’s manufacturing bases moved to China, it would be truly handicapped in times of war.
Now, here’s why we had this long preamble before we came down to India’s defence exports. Compared to other countries, South Korea, for example, India isn’t really up there yet. Even the manufacturing sector as a whole, of which the auto industry is a part, does not yet account for 25% of our Gross Value Added, a number that multiple governments have been aspiring to reach. In fact, as we saw in Business Matters a couple of episodes ago, manufacturing has slipped to below 15% in recent times.
South Korea, a much smaller nation, accounted for 2.4% of global exports for the 2018-2022 period, compared with 1.3% in the previous five years, according to the Stockholm International Peace Research Institute (SIPRI).
As an aside, if you want to know more about how South Korea cracked this puzzle, you must read this:
Coming back to the SIPRI ranking, India had earlier figured among the top 25 defence exporters in this report but has since exited that list due to changing dynamics and fluctuating demand in global arms trade. Even when we were in that list, we accounted only for 0.2% of global exports.
But let not percentages show you a dim picture. In absolute values, our exports have certainly picked up pace. Government data shows that since 2016-17, defence exports have increased 10 times to about ₹16,000 crore.
What’s spurring these figures? And are we ready to achieve this estimate of ₹50,000 crore exports by FY2029, which is 5 years away? If not, what do we need to do?
So we spoke to Dalip Singh, Deputy Editor, at businessline who writes on defence and internal security, to understand where we stood and what our prospects for the future are. It’s interesting that Dalip dwelt not only on our exports status but also on reforms needed to help expand our domestic production base. After all, a sound domestic market could give us the scale needed to lower export costs.
Script and presentation: K. Bharat Kumar
Data collation: V. Niveditha
Production: Shibu Narayan
