Strategic Competition, Arms, and Factor Endowments: India’s Defense Industry

• In Event: Security Issues in South Asia

Abstract

How do states develop domestic arms production capacity when facing a strategic competitor? Theories of arms races and regime finance capacity often assume that states can manufacture military means to confront an adversary. We investigate this assumption by examining India’s domestic arms industry. We argue that availability of two factor endowments within the economy limit military means of production. We argue that defense manufacturing requires advanced manufacturing capabilities manifested in machine tool production and skilled labor. Machine tools are the tools that make other tools and condition domestic productivity. Skilled labor is essential when manufacturing advanced military systems because of the technical nature of 21st century platforms, munitions, cyber, and other capabilities. We investigate these two factor endowments in the Indian context. India is the world’s largest arms importer. Its neighborhood harbors two nuclear armed rivals, China and Pakistan, with whom it has fought wars and festering crises continue. Strategically, India imports more weapons from Russia than any other country; yet Russia’s 2022 invasion of Ukraine and the Kremlin’s increasing dependence on Beijing undercuts the reliability of arms importation. Despite a defense industry established in the 1960s and numerous government efforts since, India has yet to produce indigenous weapons at the scale and scope necessary to supplant its import dependence. India’s ambitious indigenous weapons manufacturing program launched in 2014 combined state and private investment with import tariffs and quotas with only limited impact on India’s importance reliance. A large body of research has focused on India’s capacity to innovate weapons for its own use and exports, this paper focuses on India’s capacity to efficiently increase the capacity for large scale production. Our study of India uses government documents, think tank reports, scholarly and media articles, and interviews with industry representatives and policymakers. We find that India lacks both skilled labor and domestically produced machine tools to wean itself from foreign imports. Our findings have significant theoretical implications for research on arms races, enduring rivalries, and, ultimately, on state power derived from the military capability. The implications for India’s foreign and security policy are dramatic: India remains reliant on Russia while Russia continues to move into China’s sphere of influence. Thus, India may face an arms crisis decades in the making without the ability to respond to an acute crisis.

Authors

• Benjamin Tkach, Mississippi State University

• Vasabjit Banerjee, University of Tennessee, Knoxville