Government-To-Government Defence Deals For India

Government-To-Government Defence Deals For India

The Indian government recently announced its intent to increase direct defence deals with other Governments, citing several benefits of doing such. Let us take a look at the types of defence deals, and how India plans to achieve ‘self-reliance’ in the sector.

Crux of the Matter

Direct Deals
The Indian government recently announced its intent to encourage “government-to-government” defence deals. The move comes in the light of the Government’s aim to have defence exports of $5 billion by 2025. The display of an increasing number of indigenous products at international shows will also be encouraged.

The target has been set for Defence PSUs (Public Sector Undertaking) and the Ordnance Factory Board to have 25% of their revenue by exports within the next 5 years, with the Government also encouraging the Indian private sector to get more involved in the defence sector amidst the latest aid scheme for the MSME.

Expected Exports
While India already exports arms to other nations, the following are expected to be exported in larger quantities which would significantly increase the defence export revenue:

Government To Government Deals
The Indian government would now be aiming for direct defence deals with other Governments, with an aim to reduce direct deals with private firms of other countries. Direct deals between Governments reduce direct dealings between one Government and the manufacturing company of the other country, which reduces corruption as the “middle-men” are removed from dealings. The manufacturing firm also becomes free to make deal with the private firms of the receiving country, making Transfer-of-Technology (ToT) for home production or any other investments in the private sector of the receiving country possible.


  • The recent deal of India concerning the Rafale jets was directly between the Governments of India and France. In 2015, Indian Govt withdrew from the previous deal between India and Dassault Aviation, and agreed on a €7.87 billion deal in 2016 with the French Government for 36 Rafale jets. Afterward, Dassault and Reliance formed the Dassault Reliance Aerospace Ltd (DRAL) to manufacture several jet components in India.
  • 22 Apache helicopters arrived in India from the US in July 2020 as the result of a 2015 contract for 22 helicopters for the Indian Air Force. Afterward, India and US signed another deal for six Apache helicopters, this time coming for the Indian Army. The Apache deals are hybrid in nature, consisting of:
    • Direct Commercial Sale (DCS) between Boeing and Ministry of Defence, covering “the aircraft (less engines/sensors), logistic support, spares and services”, and
    • Foreign Military Sale (FMS) or Govt-to-Govt deal between government of India and the US government, covering “munitions, training, aircraft certification, engines, radar” etc.
  • The Bofors Deal of 1986 was signed between Indian Government and the Swedish arms manufacturer Bofors, with India receiving 400 Howitzer guns worth ₹1,430 crores. However, it was later revealed that Indian politicians including Rajiv Gandhi allegedly received more than ₹60 crores in bribe.

  • A war economy is the set of contingencies undertaken by a modern state to mobilize its economy for war production. Philippe Le Billon describes a war economy as a “system of producing, mobilizing and allocating resources to sustain the violence.”
  • Military Keynesianism is an economic policy based on the position that the government should raise military spending to boost economic growth. This type of economy is linked to the interdependence between welfare and warfare states, in which the latter feeds the former, in a potentially unlimited spiral.
  • Hughes Helicopters was a major manufacturer of military and civil helicopters from the 1950s to the 1980s. The Apache began as the Model 77 developed by Hughes Helicopters for the United States Army’s Advanced Attack Helicopter.