India is close to inking a major USD3.9 billion deal for 31 highly advanced MQ-9B Predator drones, which is expected to enhance the country’s surveillance capabilities, particularly in challenging terrains and high-altitude border regions.1 Over the years, India has engaged in similar procurement deals that have positively impacted our domestic defence ecosystem. While India is a buyer here, what impact is it likely to have on the growing indigenous defence ecosystem? Let me share some key points here:
A. Demand rush for local industries
Any mega manufacturing deal creates numerous opportunities for supporting industries to scale up their capabilities and meet the rising demand. In this case, the drone manufacturer plans to invest in India, sourcing over 30 per cent of components from Indian companies.2 This opportunity can boost local production and strengthen manufacturing capacities, particularly among defence MSMEs, further contributing to the growth of a conducive domestic ecosystem, capable of handling high-value production.
B. Innovation boom: Enhancing technical know-how
When an emerging economy negotiates deals related to high-value commodities, it creates several opportunities for domestic industries, as these deals typically involve a substantial percentage of technology transfer, promoting knowledge development within the country. For instance, last year, a Government of India enterprise signed an MoU with a French defence company that covered transfer of tech, enabling the Indian company to build and sell ships to countries that are friendly to both India and France. Such deals, where domestic companies collaborate with experienced players, often help them upgrade their own capabilities.
C. Fostering job creation and skilling
Procurement deals often drive job creation and significant skill development, which are essential for building a robust domestic ecosystem. For instance, the collaboration between India and Russia to develop the BrahMos missile has led to substantial skill enhancement for Indian engineers and technicians. This drone deal requires the establishment of a maintenance, repair and overhaul facility, along with a performance-based logistics support ecosystem, which is expected to open up significant opportunities for India’s workforce. Similarly, knowledge sharing can also foster considerable skill development.
As India continues to negotiate defence deals with major global players, with a strong focus on domestic manufacturing, the sector is projected to see sustained growth and resilience.
[1] India Moves Closer to Acquiring MQ-9B Drones, Indian Defence Research Wing, 7 August 2024, accessed on 17 September 2024
[2] General Atomics to Source Over 30% of India's 31 Predator Drones' Components from Indian Companies, Defence.In, 16 September 2024, accessed on 17 September 2024
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