Millennium Post

Defence as the driver

For a nation that allocates 15.49 per cent of federal government's total annual expenditure — as the Budget 2020-21 marks — India's bid to strengthen its defence exports is rather an expectation than innovation. It only serves the country well to foresee itself excel in defence exports, especially when our net exports stands at a negative trade balance of $184 billion in 2018-19. And, negative net exports is not something new, as the country has been basking in negative net exports for decades. Given how net exports serves as one of the four drivers of GDP, it is a matter of concern that India has not been able to have more exports than imports. And, negative net exports, albeit useless in pushing GDP growth, impact the economy. Higher negative trade balance implies a higher current account deficit — and drag on foreign exchange reserve. Taking pride in its defence capabilities, India can aspire for a larger role in defence export on the global front. Developing artillery guns, aircraft carriers, light-combat aircraft, submarines and combat helicopters will make India a manufacturing hub in defence on the global scale. Inaugurating the 11th DefExpo in Lucknow, even the Prime Minister asserted that India cannot solely rely on imports and promulgated the prospect of excelling in the sector. The prime minister spoke of expanding the export of defence equipment to Rs 35,000 crore, mentioning how it has risen from Rs 2,000 crore in 2014 to Rs 17,000 in the last two years. He also mentioned how "lack of proper policy initiative in the last several decades made India the biggest importer of defence platforms". Lack of proper policy directly invokes reforms. As such, the current government has surely made reforms, displaying the same as a remarkable feat in their time. Amongst many is India's jump to 63rd position in the Ease of Doing Business Index report 2020 from the previous 77th and the novel National Pipeline Infrastructure — Rs 102 lakh crore National Infrastructure Projects — which will ensure a collective of business-friendly environment and infrastructure for manufacturing to thrive. With the advent of Artificial Intelligence as well as India's own pursuit of space prowess, the scope of Defence equipment as well as its subsequent manufacturing is both lucrative and profitable. Boosting the Make in India sentiment for defence equipment not only decreases India's imports in defence but also pushes its exports — which will help reduce the negative export balance. A call for defence investors is also a plus for India in the current economic outlook. Defence remains a lucrative sector and investor sentiment will be favourable despite dull economic growth that has played a pivotal role in shooing away investors and further adding to the misery of the investment-starved economy. A conducive business environment, efficient supply-chain and logistics supported by state-of-the-art infrastructure is perhaps the package which will put India in a position of advantage. Defence, then, can become a trump card. Expanding its defence exports will be a major plus for India. It will help reduce the net exports negative balance.

At a time when we have a successful example in China which proliferated its manufacturing to such extent that its GDP growth was single-handedly carried forward by net exports. Across sectors — Vehicles (3 per cent of overall exports); Knit or crochet clothing, accessories (2.9 per cent); Clothing, accessories (2.9 per cent); Optical, technical, medical apparatus (2.9 per cent); Articles of iron or steel (2.6 per cent); Organic chemicals (2.4 per cent) — Chinese exports provide ample example to the discussion. Reforms ushered to create a favourable and business-friendly environment are long-term goals that fit with India's vision to achieve a $5 trillion economy. But even so, the crucial requirement is rapid implementation and realisation of short-term goals. If India recorded a jump of Rs 15,000 crore in NDA 1 regime, then NDA 2 target of Rs 35,000 — as the prime minister asserted — is achievable provided the roadmap carved is actively pursued. India's defence budget has been stagnant in recent years and criticism has poured in over India's lack of intent for new purchases from foreign countries but prime minister's push for 'Make in India' remains a better prospect. While we may spend less on buying foreign equipment — as an opposing argument may highlight — we can establish a manufacturing hub that benefits us in a variety of ways. A year-by-year analysis of defence prospects and manufacturing capacity will aptly denote India's performance in the sector and the same will also reflect in the GDP growth that happens to be patchy at the moment.

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