After France snatched a big fighter deal with India from the Swedes, Saab turned to gain a presence by investing in a manufacturing facility for the Carl-Gustaf weapon system in India. Saab leads the way for other Nordic manufacturers. It may be hitting gold.
While ambitious, Sweden’s arms export business in India faces significant challenges, particularly when compared with its major competitor, France. The global arms trade is intensely competitive, and India, one of the world’s leading arms importers, is a crucial market for many countries, including Sweden and France. Other Nordic countries are lagging far behind Sweden in arms exports. In 2020, Denmark exported only $123.62K worth of arms and ammunition, parts, and accessories to India, in 2022 Finland exported for $3,03 million, and Norway by $12.46K in 2021, all latest figures.
60 Million Dollar Investment
In the 1980s Sweden’s arms exports to India were worth more than a billion. Now, the arms and ammunition, parts and accessories is counted in tens of millions, though growing. It was $31.32 Million in 2022, according to the United Nations COMTRADE database on international trade. The big Saab manufacturing investment in India has changed the game.
During the fiscal year 2023, India received $3.21 million in foreign direct investment (FDI) in the military sector. Saab’s investment will cost INR5bn ($60m) and will be India’s first foreign direct investment project in the defence sector entirely financed and developed by a foreign company.
In India, FDI can be directed towards various entities, including Indian companies, partnership firms, proprietary concerns, trusts, limited liability partnerships (LLPs), investment vehicles, and startup companies.
Recovering From Bofors Scandal
Sweden has long been interested in the Indian arms market, but historical and ethical issues have made it challenging for Sweden to fully realize its ambitions. The infamous Bofors Scandal in the 1980s significantly impacted Sweden’s image and credibility in India, creating a lasting stigma. Moreover, Sweden’s practice of exporting arms to both India and Pakistan has raised ethical concerns and questions about its role in regional conflicts.
Rafale Snatched The Deal
In the aerospace sector, Sweden’s attempts to sell its Gripen fighter aircraft to India have been fraught with obstacles. In 2017, Saab and the Adani group signed a Memorandum of Understanding (MoU) for the manufacture of Gripen aircraft, but Saab withdrew from the deal in 2023. This decision was influenced by fierce competition in the aerospace market and the non-renewal of the MoU. India, meanwhile, has shown a preference for the French Rafale fighter jets since 2017, a choice influenced by France’s ability to produce on a larger scale and at lower costs compared to Sweden.
Leading aviation authorities have identified the SAAB Gripen as the most cost-effective modern fighter jet to operate. In 2015, SAAB finalized a $4.68 billion agreement with Brazil for the sale and local production of 36 Gripen jets, costing only half of what India expended for an equivalent number of Rafales from France. Also, the Gripen’s armament suite matches that of the Rafale, including the Meteor air-to-air missile.
However, SAAB’s arms transactions with Pakistan, India’s long-standing adversary with whom it has engaged in numerous conflicts, could significantly impede the company’s chances of securing a contract aimed at bolstering the Indian Air Force’s capabilities. Another contributing factor is Sweden’s relatively modest political influence on the global stage and in key international forums, compared to nations like France which have considerable leverage. France’s position as a permanent member of the UN Security Council, coupled with its diplomatic efforts in support of India across various platforms, showcases a level of political influence Sweden may not match.
Carl-Gustaf Blasts Through
Despite these challenges, Sweden is not out of the game. The country remains committed to establishing itself in the Indian market and is exploring avenues like joint production lines between Swedish and Indian manufacturers. This approach could offer indirect access to the Indian market and leverage India’s ongoing efforts to diversify away from Russian military equipment.
Saab leads the way for other Nordic manufacturers. It will focus on producing the latest version of the Carl-Gustaf M4 shoulder-fired rocket system. This initiative marks the first instance of Saab manufacturing the Carl-Gustaf M4 system outside Sweden. The manufacturing facility is to be located in Haryana, serving both the Indian armed forces and international markets. The Carl-Gustaf M4 is renowned for its versatility in destroying reinforced enemy positions, armor, and personnel, and is widely used by the Indian military as well as by the United States and European countries.
Sweden has been making strides in terms of local manufacturing, particularly for the Indian Army. Notably, Saab announced plans to set up a manufacturing facility for the Carl-Gustaf weapon system in India, with production expected to start in 2024. This initiative was bolstered by India’s decision to grant Saab the first 100% foreign direct investment in the defence sector, allowing them to establish a new facility under the name Saab FFV India.
The Carl-Gustaf M4 plays a vital role in the Indian military’s arsenal, offering a broad range of firepower capabilities to effectively target enemy fortifications, armored vehicles, and personnel.
Still Competing With France
France, as a major competitor, has a robust presence in the Indian defence market. President Emmanuel Macron’s presence as the guest of honor at India’s Republic Day parade in January 2024 underscores the deepening defence and strategic ties between the two nations. France’s ability to provide advanced military technology at competitive prices makes it a formidable competitor for Sweden in the Indian arms market.
Benefiting From Indigenization
India’s defence policy is increasingly geared towards indigenization and diversification of its arms suppliers. The Indian government, under Prime Minister Narendra Modi, has substantially increased defence exports, marking a 700 percent jump in just two years from FY 2016-17 to FY 2018-19. This shift indicates India’s growing capabilities in defence manufacturing and its potential as a collaborative partner for countries like Sweden.
Read More:
- Investment Monitor: Sweden’s Saab to set up missile plant in India
- Utkarsh: Saab FFV Is India’s 1st Company To Get 100% FDI In Defence Project
- Trading Economics: Sweden Exports of arms and ammunition, parts and accessories to India
- Trading Economics: Denmark Exports of arms and ammunition, parts and accessories to India
- Trading Economics: Finland Exports of arms and ammunition, parts and accessories to India
- Trading Economics: Norway Exports of arms and ammunition, parts and accessories to India
- Eurasian Times: At Half The Price Of Rafales – Why Did India Turn Down SAAB Gripen Jets Equipped With Exact Same Missiles?
