The Global Order is going through an unprecedented structural transformation. On one hand, while China is emerging as the main challenger to the American preponderance, on the other hand, as American influence declines, we see increasing attempts to slow the rise of China by limiting its access to key supply chains and ‘decoupling’ two economies.
In this context, India has two-fold strategic goals. Firstly, it wants to maintain its posture of strategic autonomy thereby not joining any US-led military alliance or blocs. Secondly, India also recognises the threat it faces from China.
The Quad is one such product of India’s strategic thinking. Similarly, under the ‘Act East’ policy, India’s outreach towards Southeast Asia is another indicator of attempts to balance the Chinese influence in the Indo-Pacific. It is in this context that one should see issues like decoupling and indigenisation of the defence industry. However, the task is much more complex than it seems.
Global Supply Chains in this Century and the Enlarged Chinese Presence
By the beginning of this century, China emerged as the key manufacturing hub for all the major Western corporations. In this interdependent world economy, key industries like semiconductors, electronics, green technology, and defence were globalised with Chinese manufacturers becoming a major cog in the wheels of Western manufacturing. Let us take green technology as a case. Access to rare earth is essential for manufacturing solar panels and batteries which go in the Electronic Vehicles (EVs).
China also happens to be a key producer of essential rare earth minerals. According to Gracelin Baskaran of the Center for Strategic and International Studies, at the beginning of 2024, “China produces 60 per cent of the world’s rare earth but processes nearly 90 per cent”.
This hold on one of the key sources of global manufacturing is consequential for countries like India. India’s climate and energy goals of the 21st century depend on access to these key minerals. Not to mention, India’s burgeoning EV sector is heavily dependent on China.
The fate of the EV industry should be a lesson for India if it seeks to protect its key industries. Under PM Modi’s regime, India has also begun to push for greater indigenisation of India’s defence equipment which has direct strategic relevance. As India seeks to indigenise its defence manufacturing, a plethora of private defence manufacturers along with already well-established government players look well-set to develop a defence industrial base. Therefore, at this critical juncture, India’s dependence on China-aligned supply chains in other domains of manufacturing provides us with a valuable lesson.
Securing the Defence Industrial Base: Vulnerabilities and Challenges
Lessons should also be drawn from the fate of American defence production and its dependence on global supply chains wherein Chinese corporations are a key component. According to a recent study done by the US data analytics firm Govini, at the behest of the Pentagon, as many as 40 per cent of the weapons secured by the Department of Defence have their semiconductors supplied by some Chinese manufacturer.
Furthermore, in the last two decades, the number of Chinese suppliers in the defence supply chain has more than quadrupled.
This acute dependence on China, especially for the semiconductors and microelectronic components, is a key vulnerability. Any strategic goal of decoupling the industrial base and balancing the Chinese threat in the Indo-Pacific stands exposed considering these insecure supply chains. The above two cases provide India’s burgeoning Defence Industrial Complex with plenty of lessons.
Lessons for India’s Burgeoning Defence Industry
To push for the indigenisation of the defence production and acquisition process, the Government of India in this decade has undertaken multiple policy initiatives like the adoption of the Defence Acquisition Procedure-2020, the declaration of Positive Indigenisation Lists and the launch of schemes like Innovation for Defence Excellence (iDEX) to support the defence related MSMEs. Experts have looked at the pros and cons of the issue from economic, military, and technological perspectives.
The security of this burgeoning private and public defence ecosystem especially its supply chain becomes a vital issue which should be investigated. India needs to learn from the mistakes of its Quad partners like the US and her dependence on Chinese manufacturing as the above examples portray.
At this moment India’s defence industrial complex is still not that huge. The private players especially are just new entrants in the market. This provides an excellent opportunity for Indian policymakers to course-correct their industry.
At this early stage, by wilfully keeping this strategic imperative in mind, Indian policymakers have an opportunity to build a more secure defence industrial base. To achieve that goal, India needs to secure its defence supply chains by consciously coordinating with the industry and reducing the presence of Chinese suppliers to a minimum.
Furthermore, if this lesson is kept in mind by all the players while building our defence industrial base, the process of production will be more secure, and the system will have the capability to weed out hostile foreign interests in the future. This harmonisation is only possible when all the actors are cognisant of the strategic vulnerabilities of insecure global supply chains.
(Jayant Chandel is a Research Scholar at Jawaharlal Nehru University. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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