India’s Defence Sector: An industry moving at an elephant’s pace

Matthew, who has a degree in International Relations, is interested in South Asian security and defence issues, as well as the geopolitics of the region

In January 2018, an alarmist South China Morning Post article circulated stating, “Pakistan port earmarked for a Chinese overseas naval base.”[1] While this rapidly caught the attention of Indian news agencies, quick to decry this as another pearl in China’s string, this story to date seems to be nothing but hyperbole.[2] This instance happened to be an exaggeration, but India’s concern about China slowly cutting the sub-continent off through the “String of Pearls Strategy” is not. This refers to “pearls” of Chinese strategic bases around India, running from Hong Kong to Sri Lanka and around to Djibouti, and the “string” of land and maritime routes connecting them.[3] India is concerned this string could be tightened at will by Beijing to strangle India of vital resources that come from maritime trade routes. For reference, India receives around 90 percent of its oil by ship. In a strategically sound move, India has placed growing importance on its domestic defence sector but at present still remains the world’s largest arms importer.


Historically, as a non-aligned country during the Cold War, India built its defence sector with materiel from NATO, Warsaw Pact, and non-aligned countries, as well as some domestic arms thrown in. Despite recognising the complications of supplying and training a military with multiple types of materiel (India currently fields aircraft from 6 different countries), India continues to import approximately 60 percent of its defence requirements annually.[4] The other 40 percent is domestically produced, which while not a small amount, is still not satisfactory under the Modi government’s ‘Make In India’ initiative.


Rajnath Singh, Defence Minister of India, said, “the Government is committed to work towards achieving a US$ 26 billion Defence industry by 2025.”[5]  To reach its goal, the Indian Government is pursuing two convergent strategies, the first of which is encouraging massive FDI (Foreign Direct Investment) growth. This includes a government run website encouraging potential investment by informing readers that, “100 FDI is allowed in the defence sector,” and “India plans to spend $130bn in 5 years on military modernisation.”[6] Secondly, the already existent defence sector is hard at work producing replacements for foreign materiel in current service. This includes a plan to develop a domestic fighter jet engine as their Soviet-built MiG fighters age out. Likewise, a supersonic nuclear missile and Agni-V ballistic nuclear missile were tested recently, adding India to a short list of countries with this technology. Finally, to reflect concerns about naval security, a modern aircraft carrier is being built in the Kochi shipyard and is set to be launched in 2021.[7] Reducing reliance on foreign defense manufacturing and increasing the ability to flex control of trade lines might go a long way in deterring Chinese aggression near the subcontinent, but India’s efforts aren’t exactly all smooth sailing.


The headwinds facing India’s defence sector might better be referred to as typhoons. The country’s premier small arms manufacturer, Ishapore Rifle Factory (RFI), domestically developed the INSAS rifle for the military in the mid-90s. This rifle has been nothing short of a colossal failure, putting soldiers’ lives at risk each time it is fielded. It even caused

negligence litigation to be filed in 2015. Despite this, the rifle only began to be replaced in 2015 by another domestic rifle, the Excalibur, also produced by RFI. Yet again, in mid-2017 the Excalibur failed army tests over concerns about quality control and ineffective firepower.[8] Elsewhere, plans to develop the Kaveri indigenous fighter jet in partnership with French company Safran have not gone anywhere, stopped this time by Indian bureaucracy. Similarly, a jet engine technology transfer under the US-India Defence Technology and Trade Initiative was suspended after intensive discussions went nowhere.[9] To date, India’s Army and Air Force still lack serious indigenous armaments.


Of the three main military branches, India’s Navy remains the most geopolitically important force, yet investment in ships has been lacklustre. India’s first modern aircraft carrier was ordered from a Russian shipyard in 2004, but 10 years on, $1.5 billion dollars over budget, and a splash of political intrigue later, the carrier was delivered.[10] Instead of learning from this and investing in domestic ship builders, the Navy has decided to contract 24 new submarines to the same Russian shipyard.[11] Chinese submarines have increasingly been spotted prowling between the South China Sea and Indian Ocean, yet India is putting faith in a lacklustre Russian firm to deliver 24 desperately needed submarines in a timely manner. The INSAS and later Excalibur rifle projects were driven forward in the face of clear issues by nationalism and political interest, and it would not be surprising to find the submarine contract is a similar story.


India’s hopes of raising indigenous defence production through FDI and contracting with local factories seems to be continuously dashed upon the rocks of bureaucracy. Though the government claims it has lessened these burdens for the sake of business, this clearly has not been the case. The US Department of Commerce also says, “they [India] invest little in research and development, resulting in slow development of new technologies.  As a result, India’s defence industrial base is underdeveloped…”[12] In the short-term, China clearly seeks to gain a foothold in South Asia, assuming it hasn’t already with pseudo-military infrastructure developments in Myanmar, Thailand, Pakistan, and elsewhere. With this in mind, India needs to: 1, invest in building a modern navy fast, and 2, take a sharp look at how it attracts and retains foreign defence industry, as well as shifting focus onto developing what is already in country. It should be clear that relying on more than 10 countries to supply your military is unacceptable and unsustainable in case of war. Beyond that, not being able to rely on what you do produce at home is demoralising and similarly unsustainable. Nothing sort of a culture shift in the MoD will likely change these habits anytime soon though, so for now India remains the world’s largest defence importer. Investors in India’s defence sector should be prepared for a high barrier to entry, coupled with dense red tape and borderline corruption once inside the market. This market is a long strategy so defence companies should focus on export contracts instead of indigenous development, at least for now.



Chan, Minnie. “”. 5 January, 2018


Iwanek, Krzysztof.”. November 19, 2019


Dabas, Maninder. “”. June 23, 2017


US Department of Commerce, “”. August 5, 2019


Capital Market. “”. September 18, 2019


Invest India. “”. January 18, 2020


PTI.”. January 09, 2020


Pandit, Rajat. “”. July 14, 2018


Pubby, Manu. “”. January 09, 2020


Mizokami, Kyle.”. January 2, 2020


PTI. “”. December 30, 2019

[1] Chan, “First Djibouti”


[2] Iwanek, “No, Pakistan”


[3] Dabas, “Here is”

[4] US DoC, “India Export”


[5] Capital Market, “India to Achieve”

[6] Invest India, “Sector Defense”

[7] PTI, “India’s First Indigenous”

[8] Pandit, “Army hunts”

[9] Pubby, “IAF to add”

[10] Mizokami, “India’s Russian”

[11] PTI, “Indian Navy”

[12] US DoC, “India Export”

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