Policy hurdles, public sector weight hamper India’s defence export drive

New Delhi: India’s defence manufacturing sector has been unable to convert its growth capacity into sustained export growth, primarily due to procedural complexities and structural rigidities.

According to a recent working paper titled “India’s Defence Equipment Industry: Exploring New Frontiers” by the Export-Import Bank (Exim Bank), India’s defence export ecosystem suffers more from non-tariff and institutional barriers than from product inadequacies.

The study points to a fragmented export approval mechanism as a key deterrent. “Obtaining export clearances and licences is a lengthy process, which can result in missing procurement deadlines,” the report observes. It adds that frequent changes in export policies, unclear timelines, and a lack of single-window facilitation undermine buyer confidence.

Another critical issue is the absence of integrated post-sale support, a standard requirement in international defence contracts.

“India lacks institutional support mechanisms for product maintenance, upgradation, and lifecycle support,” the report notes, suggesting that failure to address this significantly reduces repeat orders and service credibility.

Compounding these challenges is India’s overwhelming reliance on public sector undertakings (DPSUs) for defence production. As of 2022, DPSUs accounted for over 80 per cent of the value of total defence production.

However, the report finds that private companies, particularly those in the fields of UAVs, sensors, communication systems, and naval platforms, demonstrate greater export adaptability.

“Despite their technological progress, DPSUs have largely served the domestic demand base, with exports not being a strategic priority,” the report states. In contrast, private firms such as IdeaForge, SSS Defence, and L&T have entered niche export markets, often with limited government support.

The lack of an integrated national defence export strategy further hampers India’s prospects. While schemes such as iDEX and Make II have encouraged indigenous innovation, there is no dedicated roadmap that ties production with strategic market targeting, export financing, or foreign mission engagement.

The report advocates for establishing a nodal agency dedicated to defence exports, empowered to streamline clearances, interface with buyers, and provide after-sales support.

“A focused Defence Export Facilitation Cell could provide institutional continuity and responsiveness,” it suggests.