NDIAN AND BRAZILIAN DEFENCE INDUSTRIAL BASE - BEST PRACTICES AND MUTUAL LEARNING

A Nation with a strong defence industry will not only be more secure, but it will also reap rich economic benefit - it can boost investment, expand manufacturing, support enterprise, raise the technology level and increase economic growth in the country.

- Shri Narendra Modi, Prime Minister of India¹

Introduction

The Defence Industrial Base (DIB) refers to the national capacity of the industrial sector to develop and sustain the needs of peace and defence in wartime, which is a national resource that makes up a significant portion of the global deterrence and defence posture of a country.² A strong, self-sufficient DIB would guarantee strong armed forces and, consequently, stronger national power. Among the nations of the world, only a few like the USA, Russia and some within the European Union can boast a well-developed indigenous DIB and therefore are the main exporters of defence equipment. Among emerging economies, India and Brazil are aiming to make their DIB more indigenous and become major players in the global arms market.

India and Brazil have completed more than 70 years of diplomatic relations, including 15 years of “Strategic Partnership.” Trade and investment have grown significantly in many areas and sectors. However, cooperation between India and Brazil in the defence and security sector, especially cooperation among the DIBs, is still in a nascent stage.³ For example, India had a total defence budget of US $62 billion in 2018.⁴ It also had the “distinction” of being the world’s largest arms importer over the past decade.⁵ But India purchased only US $20 million worth of military equipment from Brazil. Similarly, Brazil has not imported any defence equipment from India in the last ten years.⁶

Historical Context of DIB

India’s defence industrialisation can be divided into five different phases as shown in Table 1. Phase One is considered from Independence till the mid-1960s when self-sufficiency was an overall economic principle; Phase Two from mid-1960 to the mid-1980s, when the term self-reliance replaced self-sufficiency in defence production; Phase Three from the mid-1980s till the early 2000s, emphasis on self-reliance was through co-production; Phase Four from the mid-2000s to late 2014, when self-reliance was tried through greater participation of the Indian private sector and the currently ongoing Phase Five when “Make in India” has become the new model.⁷

Table 1: Various Phases of Indian DIB (Source: Authors’ database)

Brazil’s first military industrialisation project was implemented by a military dictatorship in 1964.⁸ It was part of a larger industrial development strategy aimed at technological advancements made through military production.⁹ The aim was to benefit the industrial sector through the transfer of knowledge and new manufacturing process.¹⁰ Brazil developed a pulsating, grand and export-oriented DIB in the 1980s wherein almost 80-90 per cent of defence production was exported to Latin America, Africa, Arab and Asian countries.¹¹ The end of the Iran-Iraq War in 1988-89, sanctions on Iraq in 1990 due to the invasion of Kuwait and a decrease in military spending by Middle-Eastern and African countries dealt a severe blow to the export orders for Brazil’s DIB and brought the country’s major arms companies to near bankruptcy.¹² After the debacle of the 1980s and 1990s, Brazil consciously made substantial efforts to promote its Defence Industry in the new millennium. President Luis Inácio Lula da Silva’s first term (2002–2005) gave renewed political and financial support to the Brazilian Defence Industry by instituting new institutional apparatus and allocating more resources to the Armed Forces thereby placing the defence industry back on the government’s main policy agenda.

Current Setup of Indian and Brazilian DIB

India has one of the largest Defence Industrial Bases (DIB) among developing nations in the world, dominated by 41 Ordnance Factories converted to seven Defence Public Sector Undertakings (DPSUs) in October 2021; nine DPSUs; 50-odd dedicated research laboratories under the Defence Research and Development Organisation (DRDO) and a growing private sector.¹³

The Ordnance Factories (OFs) are the largest and oldest departmentally run defence production enterprise in India which once controlled 41 OFs spread at 24 different locations all over India. The assessed annual production capacity of OFB is estimated at Rs 17,000 Crores (US $2.50 billion) of which only about 1 - 2 % of their sales comes through export. Poor indigenisation record, failure to develop a strong vendor base, meagre in-house R&D, low export orientation, quality-related problems and low-capacity utilisation led to the restructuring of the 41 Ordnance Factories to seven DPSUs.¹⁴

In comparison to OFs, DPSUs have been more successful in their attempt towards self-reliance. India had nine original DPSUs as shown in Table 2. These nine DPSUs form the strategic nuclei of India’s Defence Production, especially in the fields of Aviation, Ship Building, Electronics and Telecommunication, Specialist Vehicles and Special Alloys.

Table 2: Defence Public Sector Units (DPSUs) (Source: Authors’ Database)

In May 2001, the defence industrial sector was opened up to 100% for Indian private sector participation through licensing.¹⁵ As of 2019, 442 licenses for manufacturing defence items have been issued. During the last 20 years, the private sector has had fair success with big-ticket defence orders. The private sector has also formed various joint ventures (JV) with a range of major global defence companies.¹⁶ This was also extended to the acquisition of foreign defence-oriented companies.¹⁷

The Defence Research and Development Organization (DRDO) was created in 1958 with 10 laboratories which have grown into a multi-dimensional organisation with 52 laboratories employing over 7000 scientists. These 52 laboratories are dedicated to missile systems, electronic systems, materials science, aeronautical systems, life sciences, naval systems, combat vehicles and engineering.¹⁸ The budget of DRDO has been maintained at around 5-6% of the Defence Budget which is considered low as compared to the US and China which spend approximately 12% and 20% of their Defence Budget on R&D.¹⁹

Table 3: Comparison of GDP, Defence Budget and R&D Expenditure. Source: Standing Committee on Defence, 17th Lok Sabha, 22nd Report, Lok Sabha Secretariat, New Delhi, 2021, p. 20.

Current Set Up of Brazilian DIB

The National Security of Brazil is guided by two apex-level documents, the National Defence Policy (PND) and the National Defence Strategy (NDS). The NDS highlights three strategic sectors: nuclear, cyber and space as the core areas for development. Major Brazilian defence strategic projects selected as priorities are the submarine project (PROSUB), Navy Nuclear Program (PNM), Guarani Armoured wheeled vehicles, Integrated Border Monitoring System (SISFRON), cyber defence, KC-390 aircraft, Gripen AM-X aircraft modernisation and Space Systems Strategic Programme.²⁰

The Brazilian Association of Defence and Security Materials Industries (ABIMDE) is the nodal entity which has a broad range of access to defence industries and lists more than two hundred members on its website. It is noteworthy that the current structure of the DIB is reasonably diversified, comprising different segments.²¹ The major players in the Defence Industry of Brazil are Embraer, Avibras, Helibras, EMGERON and several private industries.

Embraer, founded in 1969, manufactures aircraft for both civilian and military purposes. It is currently the 3rd largest commercial aircraft company in the world and has a wide product range for defence and security that includes A-29 Super Tucano light attack and advanced trainer, multi-mission KC-390 Millennium military airlift, command and control centre (C4I), radars and ISR.²²

Avibras, established in 1961, for aircraft manufacturing and space research, has developed Single Stage Training Rocket, two stages suborbital vehicle, solid thrusters (S-30, S-31 and S-50) and strategic materials for the production of solid rocket propellent. It has also developed ASTROS, a flexible ground-to-ground Artillery Rocket System capable of launching rockets, guided rockets, and ballistic and tactical cruise missiles, of different calibres, from the same platform, at distances between nine and 300 km providing great mobility, agility and versatility.²³

Helibras founded in 1978, developed its first helicopter AS350 Squirrel which is one of the bestselling turbine helicopters today. A partner of Eurocopter, it initiated the H-XBR project in 2008 to supply 50 multi-mission EC 725 helicopters to the Brazilian Army, Navy and Air Force.²⁴

EMGEPRON, an MoD public company created to manage projects for the Brazilian Navy, undertakes activities related to the procurement and maintenance of naval and military materiel. Projects being managed by the company include Tamandare class corvettes, Antarctic Support Ship, and Hospital Boats for use in the Amazon River and Coastal water areas, construction, modernisation of Niteroi class frigates, and also amongst others, hydrographic surveys of the Brazilian continental shelf.²⁵ Apart from above mentioned government-backed players in DIB, several private industries also form important constituents of DIB.

Defence Budget, Arms Import and Export Trends (2006 – 2021)

The trends of defence budgets, exports and imports for the last 15 years for India and Brazil allow a better understanding of the economy of scale and the availability of resources. The defence budget of India has been maintained above 2.4% of GDP for the last 15 years as depicted in the graphs below which is comparable to the world average of 2.3 %. This has ensured time-bound modernisation, sustained growth of Armed Forces, enhanced domestic procurement supporting the economy, sustained growth of DIB, and employment generation.²⁶ However, India’s overwhelming dependence on the import of weapons and equipment has been a cause of concern. Russia, the USA, France, Israel and the United Kingdom are the top five defence exporters to India in the last 15 years. India has spent its major imports on the procurement of aircraft, missiles and ships. Defence exports have been limited to IOR littoral countries apart from two exceptions of Ecuador and Armenia. Myanmar has been the lead importer of Indian defence equipment.

Fig 1: India’s Defence Budget, Arms Import and Export Trends (2006 – 2021). Source: SIPRI Arms Transfers Database Generated on 06 June 2022.

Brazil’s Defence Budget has been more or less constant remaining below 1.5 % of the GDP over the last 15 years and is expected to be stagnant till 2032 given a constitutional amendment to limit the growth of the federal budget.²⁷ Reducing/stagnant defence budget has a negative impact on modernisation programmes and strategic projects. Low fund availability for domestic procurement may affect the revitalisation of DIBs and result in yet another collapse including severe job cuts with a rise in unemployment.

Data shows that imports of weapons and equipment have increased consistently over the last four years. Major imports have been aircraft and aircraft parts. France has been the lead exporter to Brazil followed closely by USA and Germany. Brazilian exports show that the average exports each year have only been about US $65 million, as against the target of US $1 billion per year. Brazilian defence export is dominated by the sale of aircraft by Embraer.

Fig 2: Brazil’s Defence Budget, Arms Import and Export Trends (2006 – 2021). Source: Trend Indicator Values of arms export by Brazil, 2006-2021 © SIPRI.

Challenges and Problems Faced by the DIBs of India and Brazil

Despite more than 75 years in existence, the Indian defence industry is a mix of over-delayed projects with huge cost overruns. The key challenges and fault lines in the existing system may be summarised as follows:²⁸

• Self-Reliance has an inherent structural problem of separation between procurement and production. The domestic procurement headed by Secretary (Defence Production) is in competition with the import section headed by DG (Acquisition) and both agencies are not driven by indigenous procurement.

• Inherent gaps in the capacity and capability of the DIB vis-à-vis the requirements of the armed forces have resulted in continued imports. In 2016-17, total defence production was approximately Rs 57,000 crore against the capital budget of Rs 86,529 crore resulting in imports of Rs. 30,000 crores.

• Low-value addition and over-reliance on foreign sources have resulted in high import contents of the products from DPSUs.

• Low investment in defence R&D, and lack of a comprehensive and integrated R&D with equal stakes of Armed Forces and DRDO has been a cause of concern. Table 2 shows that the R&D investment of DRDO is less than 0.09 % of GDP.

• Archaic management and control structures of DPSUs and OFs have led to several weaknesses such as a lack of professional approach, excessive bureaucratic control, and poor efficiency leading to substantial time delays and cost overruns of orders/projects.

• Foreign Direct Investment (FDI) limited only to FII/FPI investments (which do not bring in technology) in defence technology.

• DPSUs/OFs enjoy the support of the government with easy access to public money and almost no accountability allowing them to quote substantially less than private companies who complain of an unlevel playing field.

In the case of Brazil, successive governments between 2006 to 2021 have supported the growth and development of DIB to make it more self-reliant and reduce imports. However, the export-import data shows that Brazil continues to be import dependent. The main reasons could be attributed to the following:

• Lack of resources and money has deeply affected several defence projects with budget cuts close to 40 per cent.²⁹

• The indigenous defence industry lacks global competitiveness, and export performance and is heavily dependent on the purchasing power of the Brazilian state.³⁰

• Fiercely contested global defence markets with advanced countries being able to offer better technology, complex weapon systems, and tailor-made defence solutions with concessions, thus preventing the entry of Brazilian firms into the global defence markets.

• Government's actions to stimulate Research, Development and Innovation have been insufficient to insert Brazilian technology into the international market.³¹

• Cooperative development by multinational defence companies in Brazil relegates domestic companies to a “copy and reproduce” status since the core technology is retained by the multi-national partner.³²

• Lack of transparency in arms procurement processes is omnipresent.³³ There have been an increasing number of reports on cases of corruption in a number of key projects in Brazil.³⁴

• Dilemmas of ‘Make’ or ‘Buy’ because of the spiralling costs of new projects and associated benefits of ‘Make’ versus the limited investment to ‘Buy’ off the shelf.

• Lack of a formal Defence Procurement Policy for both international and domestic defence procurement.

• Brazil’s defence budget has a large component of up to 80% revenue expenditure leaving inadequate funds for major procurement and modernisation.

Policy Initiatives Towards Self-Reliance

Indian Policy Initiatives. Reforms in the Indian defence industrial sector and the acquisition policy have been a continuous process, beginning with the formulation of DPP 2002 and its successive revisions, formulation of the Defence Production Policy, increase in FDI, increase in validity of licences and latest being “make in India” strategy. The mantra of “Aatmanirbhar Bharat (Self Reliant India)” may take India on a giant leap forward with a multi-pronged approach to transition from “Make in India” towards “Make for the World.”³⁵

One of the most important reforms has been the restructuring of the acquisition wing of MoD. The Defence Acquisition Council (DAC) headed by the Defence Minister oversees the functioning of three boards: the Defence Procurement Board (DPB), the Defence Production Board and the Defence R&D Board as shown in Fig 3.

Fig 3: Organisational Structure for Defence Capital Acquisition in India

Source: Ministry of Defence, India

Defence procurement is a highly specialised complex process with a high value of transaction and thus requires specialised procedures. The MoD has promulgated specialised procedures in the form of Defence Acquisition Procedures (DAP) for capital procurement, Defence Procurement Manual (DPM) for revenue procurement and Defence Works Procedures (DWP) for infrastructure development. The DAP 2020 divides the defence procurements into five categories with domestic production/manufacturing given priority one and global imports as the last priority enabling the ultimate aim of Self-Reliance.

A new patent policy by the DRDO promulgates 108 systems and subsystems which will be designed, developed and manufactured by the industry without the involvement of the DRDO. It has been empowered to select a Development cum Production Partner for its projects right from inception.

The government has encouraged investments in the defence sector through measures such as an embargo on imports, renewed FDI policy and establishment of Defence Industrial Corridors (DIC).³⁶ The MoD has notified a ‘Positive List’ of 209 items for which there is an embargo on the import. FDI in Defence Sector has been enhanced up to 74% through Automatic Route and up to 100% by Government Route wherever it is likely to result in access to modern technology. In February 2018, two Defence Industrial Corridors (DICs) were established in Uttar Pradesh and Tamil Nadu to serve as an engine of economic development and growth of DIB.

Offset policy reforms introduced as Defence Offset Guidelines (DOG) in DAP 2020 have allowed flexibility to foreign companies to change Indian Offset Partners (IOPs) and offset components, even in signed contracts. An “Offset Portal” created in May 2019 provides an online audit of offset discharge claims, faster processing of claims, greater transparency, efficiency and accountability in the process. Towards offsets, new multiplier factors for the purchase of defence products at (x 1) for products/systems, (x 0.5) for components and (x 1.5) for MSME have been introduced. A higher multiplier factor is provided for defence manufacturing (x 1.5) and Defence Industrial Corridors (x 2).³⁷

A new rationalised defence products list for which Industrial License (IL) is required for manufacturing has been notified by DPIIT in January 2019.³⁸ The validity of the IL has been increased from 3 years to 15 years enabling sufficient time and space for companies to operate and manufacture.

The overall impact of the initiatives and reforms in the defence sector has been positive and encouraging. India has set a target for 70 % indigenisation in all defence equipment and to achieve a defence export target of US $5 billion by the year 2024.³⁹

Brazilian Policy Initiatives. Greater political support to the DIB - started with the Lula administration’s second mandate, 2006–2011, and followed by successive Presidents - was the result of a strong belief that defence production, self-reliance and exports lead to economic growth and development as well as further political autonomy. The DIB was also perceived and rationalised as capable of projecting Brazil’s “soft power” in the Southern Hemisphere.

Formulation of apex-level documents such as the National Defence Policy (NDP), the National Defence Industry Policy, the National Defence Strategy (NDS) and the Defence White Paper 2020 have been perhaps the most important policy-level actions to revive the DIB. NDP precisely defined the government's stance on the DIB and aimed to reduce foreign technological dependence and ensure access to sensitive technologies.⁴⁰ The NDS paved the way for the strengthening and expansion of the DIB through its reorganisation. The White Paper introduced the Plan for Articulation and Defence Equipment (PADE) which covers 35 projects of the Armed Forces with a time horizon of 20 years and is aimed to consolidate acquisition and strengthen teaching, research and education in the sector.⁴¹

One of the most encouraging reforms has been fiscal incentives and reduced taxes for DIB. A special tax regime for the Brazilian Aeronautical Industry was enacted in 2010 which reduced taxes leading to enhanced growth. This special tax regime has been expanded to the entire DIB till 2032. The Special Tributary Regime for Defence Industry (RETID) sets forth special rules for procurement, contracting and product development.⁴² The companies must have at least 70% of their revenues from defence-related activities to be covered by RETID. Further, special laws to define Defence Products and Strategic Defence Products have been introduced to clearly define a Defence Company thereby encouraging investments in DIB.

The Secretariat of Defence Products (SEPROD) was created under the Ministry of Defence (MD) in 2010 for formulating benchmarks and strategic initiatives for the development of DIB. SEPROD operates in four strategic axes, Political-Strategic, Economic-Commercial, Socio-political and Scientific-Technological Axis.⁴³ It is organised into four departments as shown in Fig 4.

Fig 4: Structure of SEPROD

Source: Department of Defense Products (Seprod) - Portuguese (Brazil) (www.gov.br).

The SEPROD structure is complemented by the Defence Logistics Systems Support Centre (CASLODE) which provides the MD and the Armed Forces with technical, logistical and economic-commercial knowledge about the DIB about Interoperability and Life Cycle Management of Defence Systems and Products. The centre supervises and directs the Defence Cataloguing System and acts as an “Information Technology Platform for Knowledge Management on the DIB.”

The Catalogue of Defence Companies and Product book published by the MD is aimed to promote the Brazilian DIB. It is organised into Goods, Services and Information. Defence equipment along with their pictures are gathered into groups represented by four digits. Companies with equipment codes, e-mail and contact numbers are listed. The 2020 edition features around 140 Defence companies and about 900 products.⁴⁴

Offsets are directly regulated by the Ministry of Defence and are applicable to contracts above US $5 million. The minimum offset obligation for the contractor is 100% of the contract value re-invested in activities such as transfer of technology, investments, co-production, licensed production, marketing support, training and other forms of countertrade.

An institutional framework for the smooth Transfer of Technology (ToT) and its effective assimilation comprising three institutes has been established. The National Institute of Industrial Property (NIIP) is the nodal agency of Technology Transfer Contracts. Brazil Air Force Política de Compensação Comercial, Industrial e Tecnológica and Navy’s Secretaria da Ciência, Tecnologia e Inovação da Marinha oversee and supervise the ToT associated with various projects.

The initiatives and reforms mentioned above have had a positive and inspiring impact on the Brazil DIB. Currently, Brazil’s defence industry consists of 220 companies and serves around 85 countries worldwide. In 2019, sales abroad totalled US $1.23 billion. Brazil seeks to enhance its military presence in the western hemisphere and around the world.⁴⁵

Best Practices of Each DIB as Mutual Learning for the Other

We have thus far analysed the challenges/problems of each DIB as well as the various initiatives taken by the respective government. It can be argued that each country has been successful in a certain manner and in certain areas with several challenges still persisting. Their sectoral success could be identified as “Best Practices” and may be used for mutual learning.

Best Practices (BP) of Brazilian Initiatives

The persisting problems of Indian DIB could be addressed by adopting the following Brazilian Best Practices (BBP). This is elaborated below:

• BBP 1 entails the issue of apex-level guiding documents. Brazil’s apex-level documents guide the government’s policy-making, Armed Forces and the DIB by stating clear well-defined goals and roadmap. India could formulate and issue an Apex Level Document such as National Defence Strategy bringing out clear aims, roadmap and policy framework for DIB.

• BBP 2 entails law to define defence companies, products and systems. Brazil has enacted laws defining the defence and strategic products enabling clear distinction between companies which form the DIB and are entitled to fiscal and policy initiatives. India could issue policy directives clearly defining defence companies, products and systems to enable the grant of special incentives.

• BBP 3 involves a Special Tax Regime for the DIB. Brazil offers a Special Tax Regime, RETID, for companies forming the DIB covered under the legal definition of Defence/Strategic Industry. Once the law defining defence companies and products is in place, a special tax regime could be announced for Indian DIB.

• BBP 4 is related to the creation of an institutional framework for the absorption of Transfer of Technology. Brazil’s well-defined institutional framework for Technology Transfer Contracts is suitably interfaced with DIB for smooth and seamless absorption of any ToT. India could establish a central framework at the national level for efficient absorption of ToT in all sectors of industry.

• BBP 5 involves the establishment of a unified Defence Logistics System for Armed Forces. Brazil’s CASLODE provides a bridging gap between the Armed Forces’ needs and the technical, logistical and economic-commercial capabilities of the DIB. A central Defence Logistics Support System could be established for coordination between Armed Forces and DIB.

• BBP 6 is linked to the creation of a code-based Catalogue of Defence Items. Brazil’s MoD publishes a Catalogue of Defence Companies and Products as described above. Indian MoD-issued document ‘Indian Defence Industry - A Global Reach’ is a welcome effort but, a better code-based catalogue aimed at promoting Indian products in the global defence market could be explored.

• BBP 7 is associated with the successful Implementation of Offsets. Brazil has an Offset obligation of 100% of the value of the contract (valued at more than US $5 million) which is much higher as compared to India where only 30% of the value of the contract (valued at more than US $266 million) needs to be re-invested back. Despite higher offset requirements, Brazil has been able to implement almost every offset contract whereas India is struggling to reach the 50% implementation mark. The recently issued revised Defence Offset Guidelines (DOG) may be compared with the Brazilian Offset model to obtain better solutions.

Indian Best Practices (IBP) of Indian Initiatives

Indian Best Practices (IBP) that could be looked at by Brazil to address the problems/challenges of DIB are as follows:

• IBP 1 entails ensuring an adequate defence budget for modernisation and domestic procurement of equipment. India’s positive trend line of the defence budget has ensured the availability of adequate funds to support the DIB. Availability of money is the single most important factor for the sustenance and growth of DIB. Brazil should endeavour to maintain Defence Budget at 2% of GDP with an annual increment of 8-10 % for steady growth of the Armed Forces and DIB.

• IBP 2 involves a healthy ratio of capital to revenue budget. India has been able to maintain a healthy ratio of capital to revenue expenditure thereby ensuring an adequate budget for modernisation, long term projects and acquisitions. Brazil has a large revenue expenditure component of up to 80 %. Brazil could follow a two-pronged approach; first to increase the defence budget to above 2% of GDP with added component earmarked for Capital Budget. Second, gradually reduce the revenue budget over the next 5-10 years.

• IBP 3 is linked to ensuring adequate/large domestic demand for defence equipment. Indian Armed Forces have placed large orders on DIB due to the extant Defence Procurement Procedures allowing its sustenance and growth. Low domestic demand for Brazil’s Armed Forces has resulted in DIB being heavily export dependent. Brazil could issue suitable policy decisions to force the Armed Forces to undertake domestic procurement thereby supporting the DIB.

• IBP 4 is associated with establishing dedicated defence procurement procedures and guiding documents. The Indian Defence Procurement Procedures guided by DPP/DPM provide transparency, timely procurement, and equal opportunities to all players thereby reducing corruption. Brazil does not have dedicated procedures or guiding documents for defence procurement. Brazil could issue guiding documents for both capital and revenue procurements/acquisitions.

• IBP 5 is related to clear categorisation and prioritisation of all defence procurements/acquisitions. The defence procurement/acquisition in India gives Priority One to domestic DIB especially for ’Make in India’ and global imports as the last priority. Brazil could enact suitable laws/policies to formally categorise defence procurement/acquisitions ensuring priority for domestic procurements.

• IBP 6 involves promoting ‘Buy and Make’. The ‘Buy and Make’ reform allowed Indian DIB to acquire the technology and produce/manufacture the equipment in India enabling economic growth. Brazil could explore adopting the ‘Buy and Make in Brazil’ concept.

• IBP 7 is linked to the use of Offsets for attracting critical technology. The revised DOG offers higher Offset incentives (up to 4 Times) if critical technology is shared with DRDO. To counter the difficulty of obtaining critical technologies, Brazil may provide incentives in the discharge of offsets in exchange for critical technology.

• IBP 8 is associated with the creation of DIC/Special Zones. India has formed special DIC and Specialised Zones to provide a dedicated ecosystem for the development and growth of DIB. Brazil may declare special zones and corridors for DIB to provide necessary land, infrastructure and ecosystem for growth.

• IBP 9 involves central control of all Defence Research. Indian DRDO is the nodal research agency for all defence-related research including Strategic Projects. Brazil lacks a central control of defence-related research and each Armed Force has its own R&D wing engaged in respective core area research. A central organisation under Brazilian MoD may be created for central control and assimilation of all defence research thereby ensuring greater control, supervision, focused approach and efficient use of resources.

• IBP 10 involves strengthening domestic manufacturing through the ‘Make in India’ Strategy. ‘Make in India’ is a major national programme of the Government of India designed to facilitate investment, foster innovation, enhance skill development, protect intellectual property and build best-in-class manufacturing infrastructure in the country. Brazil could adopt a similar ‘Make in Brazil’ all-encompassing major economic programme aimed towards domestic industry development, enhancing employment and becoming a global manufacturing hub.

Conclusion

India and Brazil, the two leading democracies of the world, are on the way to becoming regional powers and may become permanent members of the UNSC with a rise in global prominence over the next 10 years. Both countries aim to emerge as strong nations with robust ‘soft power’ reinforced by strong ‘hard power.’ A self-reliant, strong and vibrant DIB is an important vector to realise strong ‘National Power.’ Cooperation between India and Brazil in the Defence and Security sectors is still at an early stage, especially among the DIBs.

The Indian and Brazilian DIBs are heavily dependent on defence imports and technology transfers despite possessing large industrial bases. Comparison of the challenges/problems of the DIBs with the various initiatives taken by the respective government showed that each country has obtained sectorial success. These sectoral successes identified as ‘Best Practices’ could be used as ‘Mutual Learning’ by each other whereas the strength of each DIB could be used as ‘Mutual Support’ and assistance. Accordingly, seven ‘Brazilian Best Practices (BBP)’ of the Brazil Initiative and ten ‘Indian Best Practices (IBP)’ of the Indian initiative were identified.

A well-developed, vibrant, technologically advanced, self-reliant Defence Industry Base is an inescapable requirement for India and Brazil in their journey to become global powers. The two countries through ‘Mutual Learning’ and ‘Mutual Support’ could immensely benefit each other.

Endnotes

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2. Salvador Raza, Brazil’s Defense Industry: The Emerging Transformational Role of C5I in Defense Industry’s Cluster Formation (Buenos Aires: Centro Argentino de Estudios Internacionales, 2011).

3. P Saxena, “India-Brazil Relations,” IDSA, 21 July 2012. http://idsa.in/backgrounder/IndiaBrazilRelations_210712, accessed 28 March 2022.

4. “Elephant: India Spends a Fortune on Defence and Gets Poor Value for Money,” The Economist, 28 March 2018. https://www.economist.com/asia/2018/03/28/india-spends-a-fortune-on-defence-and-gets-poor-value-for-money, accessed 28 March 2022.

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9. RDG Neto, “How Brazil Competes in the Global Defense Industry,” Latin American Research Review, 1991, 83-107.

10. Aude Fleurant, “Military industrialization: the Case of Brazil,” Arms Production and Military Services SIPRI Yearbook 2015, Aude Fleurant and Tian Nan (Stockholm: SIPRI, 2015), 553-558.

11. Patrice Franko, “The Defense Acquisition Trilemma: The Case of Brazil,” Strategic Forum, 2014, 1-15.

12. Solingen, Etel, “The Rise and Fall of Arms Industries in Argentina and Brazil,” The Politics and Economics of Defence Industries, Efraim Inbar and Benzion Zilberfarb (New York: Routledge, 1998), 244.

13. “OFB Dissolved: The 7 New Companies Inaugurated by PM Modi on Dussehra,” The Hindustan Times, 15 October 2021. https://www.hindustantimes.com/india-news/ordnance-factory-board-dissolved-here-are-7-new-defence-companies-launched-by-pm-modi-on-dussehra-101634284729696.html, accessed 18 May 2022.

14. Laxman Kumar Behara, Indian Defence Industry: An Agenda for Making in India (New Delhi: Pentagon Press, 2016).

15. Press Trust of India, “21 defence Offset Contracts Worth USD 5.67 Billion Sealed in Last 3 Years,” The Economic Times, 20 November 2019. https://economictimes.indiatimes.com/news/defence/21-defence-offset-contracts-worth-usd-5-67-billion-sealed-in-last-3-years-govt/articleshow/72145899.cms, accessed 18 May 2022.

16. Press Trust of India, “Mahindra Buys Major Stake in Australian Firms,” The Hindu, 16 December 2009. https://www.thehindu.com/business/companies/Mahindra-buys-major-stake-in-Australian-firms/article16853553.ece, accessed 31 May 2022.

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21. IPEA, Mapeamento da Base Industrial de Defesa (Brasillia: Instituto de Pesquisa Econômica Aplicada (IPEA), 2016).

22. Embraer. https://embraer.com/global/en/about-us, accessed 08 May 2022.

23. Avibras 60 Anos. https://www.avibras.com.br/site/, accessed 08 May 2022.

24. Helibras. https://www.helibras.com.br/website/po/ref/home.html, accessed 08 May 2022.

25. Emgepron. https://www.marinha.mil.br/emgepron/en-us/about-us, accessed 22 June 2022.

26. “Military Expenditure (% of GDP),” The World Bank, 2021. https://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS?start=2006, accessed 12 May 2022.

27. Bernardo Caram, “Bolsonaro Eyes Change to Brazil Spending Cap After Election,” Reuters, 29 April 2022. https://www.reuters.com/world/americas/brazils-bolsanaro-vows-change-spending-cap-rule-after-election-2022-04-29/, accessed 12 May 2022.

28. Behara, Op Cit., n.13.

29. Roberto Caiafa, “Budget Proposal 2018: Defense Suffers Significant Cuts,” Tecnologia & Defesa, 02 November 2017. https://tecnodefesa.com.br/proposta-de-orcamento-2018-defesa-sofre-cortes-expressivos/, accessed 13 May 2022.

30. Raul Gouvea, “Brazil’s Defence Industry: Challenges and Opportunities,” Comparative Strategy, 2018, 346-359.

31. Amaral, “Defense Sees Little Government Stimulus to Research and Innovation and Projects,” Noticias, 20 January 2018. https://noticias.uol.com.br/politica/ultimas-noticias/2018/01/20/defesa-ve-pouco-estimulo-do-governo-a-pesquisa-e-inovacao-e-projeta-dependencia.htm, accessed 13 May 2022.

32. Raul, Op Cit., n.29.

33. Sam Perlo Freeman, “Transparency and Accountability in Military Spending,” SIPRI, 03 August 2016. https://www.sipri.org/commentary/topical-backgrounder/2016/transparency-and-accountability-military-spending, accessed 13 May 2022.

34. Amorim Luciana Felipe, “Lula and Three Others are Denounced by the MPF for Influence Peddling,” Noticias, 09 December 2016. https://noticias.uol.com.br/politica/ultimas-noticias/2016/12/09/lula-e-mais-tres-pessoas-sao-denunciadas-pelo-mpf-no-ambito-da-zelotes.htm, accessed 13 May 2022.

35. Department of Defence Production, Ministry of Defence, Government of India, Reforms in Defence Sector - Propelling Private Sector Participation (2014-2021), 16 December 2021. https://pib.gov.in/factsheetdetails.aspx?id=148594, accessed 13 May 2022.

36. Ibid.

37. Department of Defence Production, Op Cit., n.34.

38. DIPP, Ministry of Commerce and Industry, Government of India, Press Note No. 1 (2019 Series), 01 January 2019. https://dpiit.gov.in/sites/default/files/Press%20Note_1_2019.pdf, accessed 13 May 2022.

39. Press Trust of India, “21 Defence Offset Contracts Worth USD 5.67 Billion Sealed in Last 3 Years: Govt.” The Economic Times, 20 November 2019. https://economictimes.indiatimes.com/news/defence/21-defence-offset-contracts-worth-usd-5-67-billion-sealed-in-last-3-years-govt/articleshow/72145899.cms, accessed 13 May 2022.

40. Brazil Ministry of Defence, “Portaria Normativa N 899/MD,” 19 July 2005. https://bdex.eb.mil.br/jspui/bitstream/123456789/190/1/port_norm_n0899_md_2005_pnid.pdf, accessed 13 May 2022.

41. Brazil Ministry of Defence, “White Paper on National Defence,” 2020. https://www.gov.br/defesa/pt-br/assuntos/copy_of_estado-e-defesa/livro_branco_congresso_nacional.pdf, accessed 13 May 2022.

42. Ministerio da Defesa, “Regime Especial de Tributação para a Indústria de Defesa (Retid),” 25 September 2018. https://www.gov.br/defesa/pt-br/assuntos/industria-de-defesa/regime-especial-de-tributacao-para-a-industria-de-defesa-retid, accessed 13 May 2022.

43. Ministry of Defence Brazil, “Department of Defense Products (Seprod),” 31 December 2020. https://www.gov.br/defesa/pt-br/assuntos/seprod/servicos-e-informacoes/secretaria-de-produtos-de-defesa-seprod, accessed 13 May 2022.

44. Ministry of Defence Brazil, “Defence Logistics Systems Support Center,” 25 April 2022. https://www.gov.br/caslode/pt-br, accessed 13 May 2022.

45. Peter Sufrin, “The Modern Aim and Growth of the Brazilian Defence Industry,” Georgetown University, 22 July 2020. https://gjia.georgetown.edu/2020/07/22/the-modern-aim-and-growth-of-the-brazilian-defense-industry/, accessed 19 July 2022.