India is poised to transform from a major arms importer to a significant global defence exporter, leveraging the opportunity created by Russia's declining presence in the international arms market. The Modi government's ambitious initiative aims to restructure India's defence export capabilities through innovative financing mechanisms and enhanced diplomatic engagement, particularly targeting nations that have historically relied on Russian military hardware. This strategic pivot represents a watershed moment for India's defence industry as it seeks to establish itself as a competitive alternative in the global defence supply chain amid shifting geopolitical alliances.

India's Current Position In The Global Arms Market

India currently holds the position of the world's second-largest weapons importer after Ukraine, accounting for 9.8% of global arms sales according to the latest Stockholm International Peace Research Institute (SIPRI) report. This represents a slight improvement from the 2018-2022 period when India's share stood at 11% of global arms imports.

Despite being a major importer, India has made significant strides in its defence exports, which reached approximately INR 16,000 crore (approximately $1.95 billion) in the 2022-2023 financial year with exports to more than 80 countries worldwide. This growth trajectory aligns with the government's ambitious target of achieving $5 billion in defence exports by 2025. However, India still faces challenges in establishing itself as a major defence exporter, as it does not yet feature among the top 25 arms exporting countries globally.

Russia has traditionally been India's primary arms supplier, accounting for 36% of India's imports, though its share has been steadily decreasing as India diversifies its supply chain to include Western countries and indigenous manufacturers. France follows as the second-largest supplier at 33%, while the United States contributes 13% of India's weapons imports.

This diversification trend coincides with Russia's broader decline in the global arms market, with its share of global exports falling from 22% in 2013-2017 to 16% in 2018-2022, representing a 31% drop in export volume over this period. The Russian invasion of Ukraine has further exacerbated this decline, as Russia prioritises supplying its own armed forces and faces increased international sanctions and pressure from the United States and its allies against purchasing Russian arms.

Strategic Financial Mechanisms To Boost Exports

At the heart of India's defence export strategy is the expansion of the state-owned Export-Import Bank's (EXIM) capacity to provide long-term, low-cost loans to international clients. This initiative specifically targets countries with higher political or credit risk profiles that typically struggle to access conventional financing options. The financing will largely be conducted through EXIM's commercial business, which benefits from state backing but does not draw solely from the national budget. This financial mechanism addresses a critical barrier that has historically hampered India's competitiveness in major arms deals against countries like France, Turkey, and China, which routinely offer comprehensive packages that include financing or credit guarantees.

The establishment of this robust financing framework comes in response to strong lobbying from Indian arms manufacturers who have long identified financial constraints as a major obstacle to international expansion. Most Indian banks have traditionally been reluctant to offer commercial loans for arms exports due to the perceived risks associated with countries that might have higher credit and political risk profiles. By addressing this financing gap, India aims to create a level playing field that will allow its defence products to compete more effectively on both quality and affordability in the global marketplace.

Enhanced Diplomatic Infrastructure For Defence Exports

Complementing its financial strategy, India is implementing a comprehensive diplomatic approach by significantly increasing the number of defence attachés in its foreign missions. Currently, India has approximately 64 military officers and supporting staff assigned to about 55 military missions worldwide.

The distribution of these attachés has historically reflected India's "revealed preferences" in its military and foreign engagements, with significant representation in countries like Russia, where until recently India maintained 10 officers, indicative of its Cold War-era reliance on Russian platforms. The planned expansion of this diplomatic network will form a crucial component of a new program under which the government will directly negotiate certain arms deals, especially with nations that have traditionally relied on Russian military hardware.

The strategic reorientation of India's defence attaché deployment represents a recognition of the changing dynamics of global military relationships. However, this expansion also necessitates a rethinking of how these positions are filled and managed. The current practice of posting career officers provides valuable exposure for military personnel but may limit the development of in-depth regional expertise. To address this limitation, experts suggest creating a specialised stream similar to the US foreign area officers program, which would allow for the development of dedicated regional specialists alongside career military officers. This hybrid approach would strengthen India's ability to navigate the complex geopolitical landscape of defence procurement and foster deeper relationships with potential partner nations.

Target Markets And Early Inroads

India has strategically identified several key markets for its defence exports, with a particular focus on nations that have historically depended on Russian arms supplies. Brazil represents one of the most promising early targets, as evidenced by India's proactive engagement in this market. EXIM Bank opened an office in Brazil in January 2024, signalling a serious commitment to facilitating defence deals in the region. India is currently in negotiations to sell Akash missiles to Brazil and is pursuing a deal to build battleships for the South American nation, despite facing shortfalls in its own shipbuilding capacity. In a complementary move, Bharat Electronics, which develops components for the Akash missile system, established a marketing office in São Paulo earlier this year to strengthen its local presence and engagement with potential customers.

These efforts in Brazil exemplify India's broader strategy of targeted engagement with nations looking to diversify their defence procurement away from traditional suppliers. The involvement of EXIM Bank in potentially financing these deals highlights the integrated approach India is taking, combining technical capabilities, diplomatic outreach, and financial solutions to overcome barriers to entry in new markets. While Brazil's army has acknowledged that the developers of the Akash missile system have responded to a request for information, they have indicated that no final decision has been made regarding the purchase, suggesting that negotiations are still in progress.

Overcoming Challenges In The Global Defence Market

Despite the ambitious nature of India's defence export strategy, the country faces significant challenges in establishing itself as a major player in the global arms market. India's own defence industrial base is still developing, and the country remains heavily dependent on imports for many advanced systems and components. The government's focus on building a strong domestic defence manufacturing ecosystem through initiatives like "Make in India" is a necessary foundation for sustainable export growth, but this transformation will require time, investment, and technology development.

Competition from established arms exporters presents another formidable challenge. The United States dominates the global arms export market with a 42% share, followed by France and Russia each at 11%, China at 5.8%, and Germany at 5.6%. These nations benefit from decades of experience, proven platforms, established customer relationships, and sophisticated export support mechanisms. To carve out market share in this competitive landscape, India will need to not only offer competitive financing but also demonstrate the reliability, performance, and cost-effectiveness of its defence products across multiple domains.

Conclusion: Strategic Implications And Future Outlook

India's strategic pivot toward becoming a significant global arms supplier represents more than just an economic opportunity—it signals a fundamental shift in India's role within the international security architecture. As Russia's position in the global arms market continues to weaken due to the ongoing conflict in Ukraine and Western sanctions, India is positioning itself to fill supply gaps while simultaneously advancing its own strategic and economic interests. The government's unprecedented level of involvement in facilitating defence exports—through financing, diplomatic channels, and direct negotiations—highlights the strategic importance attached to this sector.

The success of this initiative will depend on India's ability to execute on multiple fronts simultaneously: developing competitive products, establishing reliable production capabilities, creating effective financing mechanisms, building diplomatic relationships, and navigating complex geopolitical considerations.

If successful, this push could significantly accelerate India's emergence as a major defence technology provider, complementing its existing strengths in sectors like pharmaceuticals and information technology. More broadly, it would represent another important milestone in India's journey toward greater self-reliance and international influence, reshaping not only its own defence industrial base but potentially altering long-established patterns in the global arms trade.

IDN