The US Department of Defense (DoD) and the Indian Ministry of Defence (MoD) launched the India-US Defense Acceleration Ecosystem (Indus-X) on 21 June 2023.
The programme will expand the strategic technological partnership and defence industrial co-operation between the two governments, their businesses and academic institutions.
This initiative builds on a commitment by the US and Indian national security advisors in January 2023 to launch an “innovation bridge” to connect US and Indian defense start-ups as part of the US-India initiative on Critical and Emerging Technology (iCET).
India’s Innovations for Defense Excellence (iDEX) and the Office of the Secretary of Defense (OSD) are leading INDUS-X activities for MoD and DoD, respectively.
“Through INDUS-X, we will strengthen ties between our defense industrial ecosystems to make them more innovative, accessible, and resilient,” the DoD stated.
At the two-day catalyst event, hosted by the US-India Business Council at the US Chamber of Commerce, defence innovation stakeholders from across both governments, academic and research organisations, investors, defence firms, technology incubators, industry associations, and other start-up enablers came together to develop ambitious initiatives to drive Indus-X forward.
India’s defence industrial expansion
The inception of Indus-X comes just after a string of intelligence reports from GlobalData analysing the significant growth of India’s defence industrial base, where the Indian Armed Forces are beginning to source a lot of its equipment and resources domestically.
GlobalData forecast India’s defence spending to reach $445.7bn between 2024-28; this constitutes a compound annual growth rate (CAGR) of 4.96%, after an 8.8% spike between 2023-24. This projection tells us a lot about the country’s plan for self-reliance.
In continuation of the trend, the FY23 budget reserved about 75% of the defence acquisition budget to fund the procurement from domestic enterprises.
GlobalData Defence analyst Abhijit Apsingikar said: “Although the reservation of defence acquisition funding for domestic procurement impacts the prospects of the outright procurement of imported equipment, the liberalisation of defence sector now allows as much as 74% foreign direct investment (FDI) through automatic route and up to 100% through government approval.
“As such, foreign OEM’s now have the option of either partnering with local companies or to setup fully owned subsidiaries to operate within the Indian defense sector.”
Dual-use startups at the heart of Indus-X
The DoD and MoD, in collaboration with external stakeholders, will explore joint challenges for US and Indian start-ups that leverage common dual-use cases for both countries.
A joint innovation fund will be set up: IndiaSpora, IndUS Tech Council, Forge/Coimbatore and T-Hub/ Hyderabad will engage private investors to garner support for investment in defence and dual-use startups.
The DoD and MoD also intend to explore options, including public-private partnerships for a fund to support deep-tech defence start-ups.
The Biden administration hails the private sector as a source for its military innovation. The US regularly, and arbitrarily, injects cash into various defence circles where there is hope that certain dual-use technologies will give the US military a competitive advantage on the world stage.
According to a GlobalData’s Macroeconomic Outlook Report for India, the top sector contributing to foreign direct investment inflow into the country is computer software and hardware with an inflow of $9.39bn in 2022–23. This segment is an essential commodity area that deep tech startups need to produce their defence-related systems.
Increasing information-sharing and industrial co-operation in this segment will provide a larger innovation base for both countries to benefit.
