- The dominance of Russian defense manufacturers in the Indian arms market will continue to rapidly erode.
- The United States, Israel, European states and other countries such as Japan will increasingly compete to export arms to India.
- Losing market share in India, the largest arms-import market in the world, will further hamper the Russian defense industry at a time when it is also struggling to sell domestically.
India is the world's largest defense importer, accounting for 15 percent of all global imports over the past five years. However, the primary source of these weapons may soon change. Russia has long had privileged access to the Indian market, providing some 70 percent of India's weapons in volume over the last half decade. However, even as India invests heavily in upgrading and modernizing its armed forces, several pending deals between Moscow and New Delhi have stalled.
As a growing number of countries compete to sell their wares in India's robust arms market, the dominance of Russian defense manufacturers is quickly eroding. For Moscow, the decline comes at a particularly bad time: Russia's economy is struggling under the weight of foreign sanctions and the global drop in oil prices. Moscow has been forced to make sweeping budget cuts, and the previously anticipated spike in defense spending is now unlikely. In fact, the Russian arms industry would be lucky if Moscow's overall defense spending remains constant over next two years.
As increased domestic defense spending becomes less and less likely, Russia's longstanding goal of modernizing its military will be slowed, and the country's defense industry will have to look abroad for revenue. The Russian defense industry often relies on foreign orders to maintain its production lines and to fund research and development (as was the case in the 1990s). Therefore, that a number of high-profile arms deals with India are now in jeopardy is worrisome.
In one such case, an effort by Russia and India to co-produce a multi-role transport aircraft, potentially a billion-dollar project, is in jeopardy. The Indian air force is unhappy with various technical and design issues, including the aircraft's engines. The Indian government recently purchased a number of transport aircraft from the United States and is less willing to invest in a project that does not sufficiently fulfill its desire for high-altitude performance. The Indians also recently spent $400 million upgrading their fleet of 104 AN-32 transport aircraft with Ukraine's help. With alternatives available and significant opposition to the multi-role transport aircraft project with Russia, there is a high likelihood that the joint effort will not pan out.
Furthermore, a deal for Russia to supply 100 Kamov-226T light helicopters to India — signed during Prime Minister Narendra Modi's visit to Moscow in December 2015 — is at risk because of New Delhi's "Make in India" initiative, which requires that 50 percent of the helicopters' components be manufactured in India. The Russians want to be responsible for only their own components under the requirement. But because two-thirds of the helicopter parts come from third-country vendors, India is forced to negotiate with the different parties to see if they would agree to production in India. Therefore, the chances are high that delays and contract modifications could derail the entire program.
By far the most important joint project between India and Russia is the Fifth Generation Fighter program. The program aims to co-produce a multi-role stealth fighter based on the Russian T-50 prototype, but it has already faced lengthy delays. Moreover, a final design contract has yet to be inked, even eight years after the project was initiated. Indian lawmakers have considerable concerns over the aircraft's cost and engine performance and have complained in the past about a lack of transparency and inclusion on the Russian side. The project is potentially worth a massive $30 billion over its life span from the Indian share alone, and if India were to pull out of the program it would deal a severe blow to Russia's aerospace industry. Indeed, if India were to opt out, the Russian air force would likely have no choice but to cut the number of next-generation aircraft it plans to add to its fighter fleet.
Complications surrounding these key Russo-Indian arms projects create opportunity for alternative suppliers. In fact, Indian government figures indicate that while Russia dominated weapons sales over the past five years, the United States may have actually overtaken the Russians in overall sales — by almost a third over the past three years. India recently struck a number of important deals with the United States (on helicopters and transport aircraft), South Korea (on self-propelled howitzers) and Israel (on air defense, drones and anti-tank missiles). New Delhi is also currently finalizing a fighter aircraft deal with France, which beat out Russian, Swedish and American competition. Moreover, India is evaluating a naval version of the fighter, a troubling prospect for Russia, which heretofore provided the MiG-29K for Indian carriers.
Despite the disputes, some of the Russo-Indian arms deals may well survive. Indeed, the Indian defense market is rather infamous for its complicated processes, long delays and inevitable contract modifications. However, that some major arms deals between the countries are now encountering difficulties does not bode well for Moscow's desire to remain the top exporter to India over the long term. With increasing competition from the United States, Israel, European countries and potentially other countries such as Japan in the future, Russia will inevitably lose market share in India. If major projects like the Fifth Generation Fighter Aircraft do fall through, then Russia's position may erode even faster than expected, greatly impacting its arms industry at a time of growing economic difficulty back home.