Around Rs 2.10 lakh crore worth of orders for defence equipment would be placed in Indian industries in the next 7 years

Tectonic plates of geopolitics are beginning to shift. The ongoing Russia-Ukraine conflict has exposed the fault lines of globalisation. And being self-reliant as a nation, especially, in critical areas has emerged as the most important lesson for countries.

India, which is the largest importer of arms with 11% of total global imports, has a critical dependency in the defence sector on countries like Russia, France, Israel, and the US among others. As the Ukraine war raises alarm over the need for self-reliance on defence technology, India’s efforts of indigenisation have gathered pace. India has so far released three negative import lists comprising 310 items that will now be produced in the country. Interestingly, the list is exhaustive. From platforms like Naval Utility Helicopters (NUH), Medium Altitude Long Endurance (MALE) UAVs, Light Weight Tanks, and unmanned underwater vehicles to high-end sensors like the Multi-Function Surveillance, Track, and Guidance Radar (MFSTAR), various missile systems; India has embarked on an ambitious journey of creating a huge military engineering infrastructure in the coming decade.

Business opportunities are also substantial for Indian industries. As per estimates, around Rs 2.10 lakh crore worth of orders for defence equipment would be placed in Indian industries in the next five to seven years. As technology is a big component of each military equipment, the Indian technology industry - engineering services companies, IT services firms, and technology start-ups - is likely to be a huge beneficiary of this indigenisation move.

“Indian IT firms including engineering services companies have never been aggressive on the government contracts in the defence space due to various reasons. However, this is likely to change as the government is putting in concerted efforts towards ‘Make in India’ of defence equipment. Also, the market opportunities are huge,” said Pareekh Jain, an engineering services consultant and Founder of Pareekh Consulting.

“Moreover, big corporate houses like Tata, Mahindra, and L&T are betting big on the Indian defence sector. So, it will be natural that these companies will take support from their respective group companies (like TCS, Tech Mahindra, LTTS) to execute the software part of it,” he added.

Role of Indian Firms & Start-Ups

Analysts also pointed out that the Indian government’s emphasis on the Transfer of Technology (ToT) with global defence firms is likely to boost the local ecosystem. Notably, the DRDO (Defence Research & Development Organisation) has entered into more than 1,430 ToT agreements with the Indian industry, out of which 450 have been signed, in the last two years.

Indian engineering services companies like L&T Technology Services, Persistent Systems, Cyient, Tata Elxsi along with all large Indian IT services companies are currently working with many global defence giants in the US & Europe. Many feel the policy push will help these companies to tap the domestic market better.

“The trend earlier was that complex technology work which requires niche system and software engineering skills were largely being done outside the country but with this policy shift combined with increasing public-private partnerships, some of the high-end engineering design is being done out of India and this trend will only continue to rise. Indian engineering services firms can offer solutions such as digital engineering, system engineering, and avionics design that enable higher, faster, and safer product performance and can help further modernise the country’s defence sector. The day is not far when Indian engineering services companies can enable ‘Made in India’ for the defence sector,” Amit Chadha, CEO and Managing Director, L&T Technology Services (LTTS) told the Deccan Herald.

Not only established firms, but start-ups are also increasingly playing a significant role in making the country self-reliant in defence technology. Since 25% of the budget for Research and Development in defence has been reserved for industry, start-ups, and academia in this year’s budget, it is expected to give a big push towards innovation.

“A lot of advanced technologies are not accessible for defence from global companies, it opens up huge opportunities for India’s semiconductor start-ups and technology companies. Start-ups like Astrome, Idea-Forge, Botlabs to name a few are developing very good technologies which can be successfully used for the strategic sector,” said Dr Satya Gupta, President of VLSI Society of India & advisor to India Electronics & Semiconductor Association (IESA). He added that an initiative like iDEX is an excellent start to increasing the participation of start-ups in the defence technology sector.

Hybrid War

As future war is going to be hybrid with cyberattacks being a key part of warfare, this also throws open significant opportunities for start-ups, cybersecurity firms, and Indian IT firms that can develop specific solutions to thwart such attempts. “We have seen increased cybersecurity threat levels in the US and Europe due to the ongoing Russia-Ukraine conflict. As any future warfare will have a significant cyber component, public-private participation with support to start-ups can enable India to design and develop India-specific cybersecurity solutions,” said Sanjeev Dahiwadkar, Founder & CEO of ITShastra, a Pune-based IT services company.

The global order is expected to see a significant change in the coming years. India as a middle power with two nuclear-armed neighbours doesn’t have the luxury of depending on any other nation for critical defence technologies. As the Ukraine war shows, every nation has to fight its war alone.

So, it’s better to indigenise our defence technology at a faster pace than to put our national security hostage to other nations’ whims.