By Ashok Atluri
Innovation is one of the key factors that is driving the $2,443 billion global defence industry to greater heights. The ongoing Russia-Ukraine war, in a way, is showing the way forward in the transformation of the defence sector. Take drones for example. It’s clear how the weaponisation of commercial drones has posed significant challenges to large armies. This could be illustrated as one of the simple yet innovative ideas which will transform and disrupt the future of warfare.
Globally, the defence industry is on the threshold of rapid evolution, and it is time for the $1.068 Trillion Indian defence industry to seize the opportunities and emerge as one of the leaders in the world market. How can this be achieved? The first priority should be given to the creation of Intellectual Property (IP). This will help industry develop new defence products for the country’s armed forces as well as the global market. The second move should be to scrutinize the procurement processes and support indigenous defence designers/developers who are innovative and agile. Next is to change the mindset of the country’s defence industry, which has been primarily dominated by public sector entities in the past decades. A paradigm shift is required in thinking to achieve the global dreams by embracing innovation.
Indian defence companies should pitch themselves as innovators who can add value to the existing technologies while entering into partnerships with foreign manufacturers from top markets such as the US, Europe, and Russia. This will help the companies to absorb and enhance the technology in India and offer the latest products to their customers too. Only through such strategic steps can India power ahead in the competitive global markets. To achieve this, an important step for the authorities will be to strengthen the Defence Intellectual Property Rights (DIPR) policy and patenting.
Getting a Grip Over IP
It is heartening to note that the Indian government has recognised the value of IP and taken initiatives such as the DIPR policy to encourage organisations to file patents. Two important schemes that are moving in the right direction are— the Innovations for Defence Excellence (iDEX ) scheme and the Mission Raksha Gyan Shakti (MRGS). While the former focuses on innovation and technology development in the defence and aerospace sectors; the later aims to cultivate and promote an IP-driven culture in the defence sector.
However, all is not rosy on the patents and IP front. During the year 2023, India received a total of 90,300 patent applications. The Patent Office granted over one lakh patents between 2023 and 2024. While this is considered an all-time high for India, it is dwarfed in comparison with global leaders like China and US (1.58 million and 505,539 patents in 2023 respectively). Viewed in this background, much needs to be done to bridge this yawning gap.
Defence Innovation and its Challenges in India
In the financial year 2023-24, India’s defence exports touched approximately US$ 2.63 billion, an all-time high. While this milestone places India among the top 25 global defence exporters, the gap to becoming a true global leader remains large. The bigger challenge to overcome are the roadblocks to reward and incentivise homegrown innovations.
To achieve global leadership, it is crucial to support companies/entities that develop cutting-edge technologies taking risks, investing and going through frustration and failures, resulting in a low success ratio.
How can the challenges be overcome? There are several ways for backing and funding these innovative projects. Let’s look at two. The first is for the armed forces or government to fund and oversee product development. However, this process is typically long drawn and can filled with bureaucratic hurdles, which need to be tackled.
The second approach is for companies willing to take risks to self-fund the research. Here, the armed forces can ask the company to fund projects and, in turn, place orders if the product meets the strict criteria laid out.
The onus will be on the companies to identify the need and develop products to meet the users requirements. These products can be groundbreaking and carry a high risk too. The larger objective should also be to reward the creators of the product/technology so that they in turn attract more innovations.
Relook the three-vendor policy
The existing three-vendor policy needs to be tweaked. The issue in focus is the clause known as ‘fair competition’. Innovative products often have only foreign counterparts or, in rare cases, are the only one of their kind in the world, making it difficult to meet this so-called “fair competition” requirement.
The armed forces typically require two-to-three vendors to ensure competitive pricing. However, this can be problematic when there are no comparable products. When alternative foreign products are available, price discovery can be straightforward through budget requests in the Request for Information process. However, caution is necessary, as foreign companies may aggressively price their products with the intention to damage the benchmarking to the detriment of both the Indian industry and the armed forces. In cases where there are no foreign counterparts, cost benefits should determine pricing which ensures fair compensation for the innovation.
The overall goal should be to foster innovation and risk taking in development of cost effective and quality products. Indigenously developed products with no competition can be procured on a single-vendor basis. In many high-tech products, there are few or even one global vendor. The government should identify and place orders from domestic companies fulfilling these criteria.
Care must be taken to differentiate between companies genuinely developing IP and those merely manufacturing through Transfer of Technology. Sustained global leadership requires the ability to develop next-generation products, which is possible only with in-house IP development programmes.
If a defence designer or startup, for instance, creates a rare IP, they should be rewarded for their innovation with bulk orders and showcased at global markets. Currently, the focus of the Union government is on building a startup ecosystem, which is a welcome and right step.
(The author is CMD, Zen Technologies.)
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