Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
India’s arms industry passed a milestone in January with the unveiling of the country’s first intelligence, surveillance and reconnaissance drone, which was made by the defence arm of the Adani conglomerate in a joint venture with Israeli military producer Elbit.
The Drishti-10 Starliner is named after the Hindi word for “vision”, and India has a lot to keep its eye on — its land and maritime borders with 11 nations stretch many thousands of kilometres and include a disputed frontier with arch-rival China over which the Asian giants have repeatedly clashed.
But India remains the world’s biggest arms importer, forced to shop overseas even for basic equipment such as assault rifles — something New Delhi is pushing the private sector to help address after decades in which state-run groups have struggled to build a world-class defence industry.
“Adani’s move into defence is not something unique or specific to them but part of a broader attempt by the government to lure companies in,” said Walter Ladwig, a senior lecturer in international relations at King’s College London.
Over the past 10 years private conglomerates including Tata, Bharat Forge, Reliance and now Adani have heeded calls by the government of Narendra Modi for more “indigenisation” of arms production, often in partnership with foreign companies that New Delhi has been pressing to invest. Adani has long-established business ties with Israel, where its ports arm operates the Jewish state’s second-largest port in Haifa.
India in 2020 lifted a cap on foreign investment in the sector from 49 per cent to 74 per cent, making it more attractive for outside companies to come in.
The Drishti-10, which is initially being supplied to India’s navy and army, is built at the Adani Aerospace Park in Hyderabad. With a carrying capacity of 450kg and able to stay airborne for 36 hours, the unmanned aerial vehicle is based on the architecture of Elbit’s Hermes 900 drone with additional capabilities as required by its Indian customers.
Adani’s UAV programme is among the highest-profile elements of a push into defence launched in 2018 by the group founded and led by India’s richest man Gautam Adani. His conglomerate is also among those that New Delhi has been prodding more broadly to “Make in India” as part of a drive to create business and jobs in its underperforming manufacturing sector and to boost exports.
The group, whose share prices have bounced back since last year’s attack by short seller Hindenburg Research, on Monday inaugurated two complexes for the manufacture of ammunition and missiles — set to be among south Asia’s largest — in Kanpur, Uttar Pradesh.
Another of the company’s factories, in the state of Madhya Pradesh, is building small arms for the Indian armed forces, reported by local media to include light machine guns, assault rifles and pistols.
Adani Defence and Aerospace declined an interview request but a person familiar with the Gujarati group’s thinking said: “there is a national agenda on security which we are trying to work towards and see how Adani can play a role in the supply chain, creating jobs and a technology base”.
The conglomerate’s defence and aerospace unit employs about 2,000 people, including contractors. The subsidiary is consolidated within Adani Enterprises, the group’s flagship listed company, and does not report earnings.
Adani has been one of India’s top contractors for infrastructure and emerging industries including ports, airports and solar and wind power, which the Modi government has been keen to farm out to the private sector.
One defence analyst said developing a fully indigenous defence industry — including original equipment manufacturers capable of designing and developing new products and their components — would be a matter of “decades” for India.
“Adani is not an OEM; it’s not a first-tier defence developer or manufacturer,” said Jon Grevatt, head of Asia-Pacific news with defence intelligence provider Janes. “But what Adani has, like other Indian conglomerates, is local facilities — and it’s supported by a government that’s telling foreign firms that they have to partner with local companies to sell to the Indian military.”
The spoils are potentially huge. India’s defence budget in 2022-23 was Rs5.25tn ($63bn), up almost 10 per cent on its target in the previous financial year, although 69 per cent was spent on operations, salaries and pensions, according to Janes.
Some of India’s defence companies are beginning to export. Tata’s joint venture with American group Sikorsky has been delivering “indigenous” cabins for the S-92 helicopter and associated parts to Lockheed Martin in the US. A unit of Bharat Forge is exporting 155mm artillery guns to an undisclosed buyer. Adani has exported aero-structures and subsystems of Hermes 900 UAVs. The company will not confirm to which countries it is exporting but Indian media have reported that some of its products are going to Israel, south-east Asia and Africa.
In response to critical reports in Indian media about exporting to Israel at a time of a war that has killed almost 30,000 Palestinians, the company specified that the UAVs in question were only used for intelligence, surveillance and reconnaissance.
“There are lots of potential positives for Adani, but the real proof of the pudding is not what they assemble, but what they design, assemble and produce,” said Janes analyst Grevatt. “It’s a great place to start, but the proof of the pudding is over the next couple of decades.”
