Leveraging India’s start-up ecosystem as a defence strategy

Author: Christian Kurzydlowski, Toronto.

Global strategic considerations are fluid and ever changing. India’s geography and location position it at the nexus of global supply chains and powerful state and non-state actors. It needs every advantage at its disposal to compete, defend, grow and trade.

India will have to balance pressure from the United States, a key partner in the Indo-Pacific initiative for maritime security, to counter Chinese ambitions in the South China Sea. In return, the United States acts as guarantor against Chinese threats to India’s land borders and Chinese engagement with Pakistan. India will also have to balance its relationship with Russia, considering India’s tilt toward the United States and Russia’s strategic focus on its relationship with China.

But India has space to manoeuvre. Among the main factors driving the scope and scale of India’s economic change is its start-up ecosystem. From a defence point of view, India’s start-up ecosystem, in particular its unicorns and information technology (IT) sector, provides it with options.

Unicorns are start-ups valued at over US$1 billion and in 2021 India added forty-four unicorns, doubling its unicorn size to 83 with a total valuation of US$296 billion. While Indian start-ups come from a variety of different industries, IT services have been its main growth engine, making up 8 per cent (US$16 billion) of India’s total GDP in 2021.

Buoyed by a long tradition of IT engagement, innovation and the rise of consumerism, India’s start-up ecosystem is seemingly primed for expansion. It is ready to go beyond the service sector and into ‘defence tech’.

This is a recent aspect of India’s campaign for national self-reliance. India can give itself a boost by leveraging its start-ups as sources of national security, as much as they are leveraged as a source of competition and innovation. This will mean overcoming a cumbersome bureaucracy, being realistic about technology and engineering capabilities and creating the country’s own civil-military-industrial complex to stimulate innovation.

India spends 2.3 per cent of its total GDP on defence, with US$64 billion spent on military hardware in 2021. As the world’s second-largest importer of military hardware, boosting its own domestic production will both help modernise India’s manufacturing landscape and stimulate job creation.

The Innovation for Defence Excellence initiative, launched by India’s Ministry of Defence in 2018, is the clearest example of India’s start-up scene being utilised for national security. It sought out academics and industry leaders to bridge the gap between consumer tech and military tech.

Acting as an incubator, Innovation for Defence Excellence awards contracts to start-ups, research centres and private companies based on India’s two key defence interests — innovation and self-reliance. It is based on an earlier conception of the United States Department of Defence’s ‘Innovation Unit,’ which was envisioned as a means for the United States military to streamline its use of commercial tech.

The government’s decision to ban imports of 101 weapons systems between 2020 –2025 is a measure to ensure that the necessary components for manufacturing and production are sourced in India. The Defence India Start-up Challenge offers grants to start-ups in India’s defence industry. But innovation can only go so far when selected start-ups are given a conditional grant of only around US$200,000.

Such grants are unsustainable for intensive capital-based research development and require outside private investment. This presupposes civil-military cooperation and a procurement process within the Ministry of Defence where there currently is none. India’s defence tech is also a risky investment due to its uncertain returns arising from a lack of investment strategy. For a true civil-military industrial complex to emerge, leveraged on India’s start-up ecosystem, bureaucratic risk aversion and coordination failure in the Ministry of Defence must be addressed.

Increasing risk tolerance could stimulate innovation, creating an environment which is conducive to real progress. Coordination failure hinders the creation of a real procurement and planning process. A procurement and planning process would not only allow the Ministry of Defence to source hardware components from within India as much as possible but would also incentivise small and medium enterprises to increase manufacturing and focus on quality control.

Given that conditional grants to start-ups must also be justified on procurement grounds, many small and mid-sized start-ups will find it difficult to achieve this, making an integrated planning and procurement policy even more imperative.

Ultimately, the litmus test for Innovation for Defence Excellence is the scaling of prototypes which, after almost four years, has still not happened. At a time when strained US–China relations create space for Silicon Valley look toward actively powering the Pentagon through its technological expertise in cyberwarfare and misinformation, India has not yet been able to similarly harness its own burgeoning start-up industry. China has copied Silicon Valley’s model of quick investments for its own weapons development. India will do well to look to China’s successes here and adapt what it can if it wants to defend itself, let alone compete.

Christian Kurzydlowski holds a PhD in history from the University of London and is currently working as an independent researcher based in Toronto, Canada.

The post Leveraging India’s start-up ecosystem as a defence strategy first appeared on East Asia Forum.

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