India’s defence export rise opens a door for Australia

Indian Prime Minister Narendra Modi’s visit last week to Australia was headlined by a massive stadium event (Opens in new window) for members of the Indian diaspora in Melbourne, but also included substantive progress on India–Australia cooperation on investment (Opens in new window), energy (Opens in new window), sports (Opens in new window), education (Opens in new window), and defence. The announcement of a wide-ranging India–Australia Joint Declaration on Defence and Security Cooperation (Opens in new window) tended to be undervalued in Australian commentary with the focus on domestic debates around AUKUS, China’s growing military capabilities, and the implications of the wars in the Middle East and Ukraine.

Yet over the past decade, security cooperation between India and Australia has broadened and deepened more than many appreciate.

The two countries issued a Joint Declaration on Security Cooperation in 2009 and have built out bilateral coordination mechanisms including a 2+2 Foreign and Defence Ministerial Dialogue (Opens in new window) as well as working-level defence, diplomatic, and intelligence engagement. The two countries’ militaries participate in regular bilateral Austrahind (Opens in new window) army exercises and AUSINDEX (Opens in new window) naval exercises, as well as multilateral exercises such as MALABAR (Opens in new window) (with Quad partners), KAKADU (Opens in new window), and TALISMAN SABRE (Opens in new window). In practical terms, the air forces and navies now engage in air-to-air refuelling (Opens in new window), submarine rescue (Opens in new window), and naval replenishment (Opens in new window). Multilateral cooperation has broadened within the Quad (Opens in new window) and through bodies including the Indian Ocean Rim Association (IORA) and Pacific Islands Forum (Opens in new window) (PIF).

The new joint defence declaration is more ambitious. It commits to increasing the complexity of military exercises, accelerating interoperability, broadening professional military education and workforce development, and “expanding aircraft deployments from each other’s territories”. The two countries have pledged to conclude a Maritime Security Collaboration Roadmap – which will presumably build on ongoing cooperation on humanitarian assistance and disaster relief (HADR), logistics (Opens in new window), evacuation operations, and undersea domain awareness. They also included a heavy defence and cybersecurity component (under Pillars 3 and 5) to their new Partnership on Cyber, Critical Technologies and Supply Chains (PACTS) (Opens in new window). A new space tracking terminal has been commissioned (Opens in new window) on Australia’s Cocos (Keeling) Islands for India’s human spaceflight program.

But the two countries also articulated a more ambitious objective of defence industrial cooperation, including to “develop arrangements for advanced defence science and technology collaboration.” This may appear challenging (Opens in new window), but India has made remarkable developments in its defence industrial capabilities over the past five years. These offer little-appreciated opportunities for many of its partners, including Australia.

An inflection point (Opens in new window) for India’s defence industrial aspirations was the Russian invasion of Ukraine in February 2022. Russia had traditionally been India’s largest source of defence imports, although efforts had been made by India to diversify in the early 2000s and especially after 2014, seeing a gradual reduction of Russia’s share of India’s imports from about 80% in 2014 to a little less than 50% by 2022. It took the war in Ukraine, when Russia prioritised equipping its own forces and Western sanctions complicated India’s ability to finance imports, for this trend to accelerate. The consequences have been faster indigenisation and diversification of India’s defence industrial base.

The change is already palpable. Last year, India exported US$4 billion in defence articles (Opens in new window). Recent years have seen exports of Brahmos cruise missiles to the Philippines (Opens in new window), surface-to-air missiles to Armenia (Opens in new window), high-speed boats to Vietnam (Opens in new window), and a second-hand Kilo-class submarine to Myanmar (Opens in new window). An Indian company has established a production line for armoured vehicles in Morocco (Opens in new window).

But this handful of major sales masks a more telling reality. India’s largest defence market for its 145 exporters (Opens in new window) is, in fact, the United States.

India produces components for Apache helicopters, F-16 aircraft, and MQ-9 UAVs. Smaller Indian firms are now producing missiles, sensors, drones, and propellants for a range of international customers, and are increasingly collaborating with American, French, and Israeli defence firms to scale production at lower costs. A good example of India’s international cooperation is the K9 Thunder self-propelled artillery (Opens in new window) system (called the Vajra in India), a joint venture between South Korean conglomerate Hanwha Aerospace and Indian manufacturer Larsen and Toubro. Similarly, India has established production lines in Gujarat for Spanish-origin C-295 transport aircraft (Opens in new window) and in Telangana for US-designed V-BAT drones (Opens in new window).

Over 78 defence start-ups (Opens in new window) have been established over the past five years, many focused on drones, counter-unmanned aerial systems, and space technologies. Challenges remain, particularly higher up the technology ladder. Complex systems such as nuclear propulsion and jet engine technologies are subject to much stricter export controls, higher costs, and more exacting specifications. Indian companies, both public and private, have had an easier time providing domestic alternatives for missiles, artillery, and surface vessels than for fighter jets and diesel-electric or nuclear-powered attack submarines. While much of the recent infusion of investment has been propelled by emergency procurement following clashes with China (Opens in new window) and Pakistan (Opens in new window), there remain challenges to India’s procurement process, which inhibit long-term investment.

Despite the clear challenges, the growth in India’s defence industrial production and exports offers opportunities for many other countries seeking to diversify their partnerships. India’s lower-cost production of arms and ammunition is likely to be most attractive to other developing economies. Yet as the United States and the European Union (which signed its own Security and Defence Partnership (Opens in new window) with India this year) are discovering, the production of specialised and dual-use components can make their own domestic defence industries more competitive.

For a country like Australia, juggling cost pressures and capability gaps, co-production opportunities with India’s expanding defence sector are real and worth pursuing.