With India emerging as a “major global power”, its defence needs have also multiplied. It has been spending an enormous portion of its budgetary allocation on defence, but in recent years, after 2001, the Indian defence industry has grown up substantially. The government capital spending has quadrupled from $ 3 billion in 2000 to $12.2 billion in 2010. India is the sixth biggest spender on defence from 2000 to 2010.
No doubt it is in the strategic interest of India, aspiring to be the global power to develop indigenous and internationally competitive defence industry base. But at the same time, it has to ensure that its resources are properly used and not siphoned off.
India has the third largest Army, the fourth largest Air Force and the seventh largest Navy in the world. It is among the top 10 countries in the world concerning military expenditure and world's largest arms importer. India allocates about 1.8 per cent of its GDP to defence spending. About 30 per cent of its equipment is manufactured in India, mainly by public sector undertakings. It is one of the largest importers of defence equipment - roughly 60 per cent of requirements are met through imports. India's arms imports are now almost three times as high as those of the second and third largest arms importers, China and Pakistan. India is among the top five importers of arms, besides China, Pakistan, the UAE, and Saudi Arabia.
All these factors make the Indian defence industry one of the most attractive bazaars globally. Modi government’s flagship Make in India program has in fact created a conducive policy setting for the foreign companies, especially those operating from the US to the bay. Their principal argument has been to strengthen the engineering might of India and transform India into a self-reliant nation with export capabilities in the defence sector.
The needs of the defence industry are met by defence public sector undertakings (DPSUs) and Ordnance Factories (OFs). They contribute about 90 per cent of the total domestic defence manufacturing output.
Since opening up of the defence industry for private sector participation, the Department of Industrial Policy and Promotion (DIPP) has so far issued 222 Letters of Intents (LOIs) and issued Industrial Licences (ILs) to more than 150 companies. Larsen & Toubro, Tata group, Pipapav Defence and Offshore Engineering Ltd., Reliance Industries Ltd., Mahindra and Mahindra, Ashok Leyland Defence Systems, Piramal System and Technologies are some of the key Indian players in the defence industry.
As India pours billions of dollars into upgrading its military, U.S. defence contractors have become proactive in establishing partnerships and grab a piece of the pie. The Indian Ministry of Defense has already issued licenses and cleared deals worth several billions of dollars. It is expected that the Indian government will spend $620 billion by 2022 on defence. As India bolsters its military, it is also strengthening its relationship with the U.S. government. Last year during his April trip to India, Secretary of Defense Ashton Carter had said: “The US-India relationship is destined to be one of the defining partnerships of the 21st century.”
The US move would turn India, a source of business opportunities for its defence contractors. Several US-based companies are looking to gain a share of this market. In fact, Indian companies desire to enter into partnerships with the US companies not only to get access to Indian opportunity but also to be part of the international value chain. In Carter’s vision, India’s defence market will expand over the next few years. Its defence spending has been strong and is projected to remain so through the 2020s.
While the USA has already replaced Russia as the key defence supplier to India, its appetite for more has been consistently growing. What has been shocking is that the US has not supplied any new weapons to India. It has been dumping the obsolete armaments refused not only by the US Army but even its allies among developed countries. That was the case with selling transport aircraft C-17 Globemaster. Their production is closed in the US due to proven inefficiency and absence of any order for them from anybody. The general regulation obliges producers to maintain supplies of spare parts and service within 15 years after production is shut. Then these extremely expensive aircraft are likely to become grounded memorials of wasted money of our Defence budget. There are several other examples of that, including supplies of helicopters, unable to operate in high mountainous areas and proposed building of old jet fighters F-16 and F-18, production of which is to shut globally.
Instead of sacrificing the country’s interest, the Modi government must ensure that the ill-designs of US contractors and suppliers are foiled. It is no secret that the global defence budget has been shrinking severely. Apparently, this has added value to the Indian defence market. The companies are rushing to exploit the Indian market. But the government has to act in a prudent manner. India must look to mature markets such as France and UK besides preserving and strengthening the old relation with the Russia. HAL manufactured earlier Russian brand of Sukhoi SU 30, but now some new companies are entering the fray. The government ought to tread cautiously as it involves not only the quality of the product but also the security of the country.
The time is ripe for robust defence spending not only because the economy is now strong, but it also faces strategic threats from Pakistan and China. The US proposals, to sign the so-called Basic Defence Cooperation Agreements BECA and CISMOA could drag India into unnecessary confrontations with China and potentially push cooperation with Russia in a blind alley. In this backdrop, the announcement of the shift in the USA foreign policy by the President-elect Donald Trump ought to be borne in mind. His remarks made it clear that the US cannot any longer have a firm grip on every part of the World and has to withdraw from many areas, leaving space to other regional powers. His observation made Turkey look for reconciliation with Russia and Iran.
In the current scenario, India cannot afford to jeopardise its long-term goals of international policy for getting US’ support in countering rising Chinese power. The agreements which the US intends to ink with India would imperil high technology cooperation with Russia and leave the Indian Army without new defence platforms.
The Modi government has been promoting Make in India, but one cannot be sure of its success as when analysed there is an absence of policy. It’s just, ‘Come and build in India.’ True enough India has been following this policy for decades in the defence market. It is ironical that the government which claims to be nationalist did not take the matter seriously and involve Indian resources and infrastructure in the task.
While the Indian defence market is large, money allocated to the military isn’t always spent efficiently. Yet another reason for the lack of indigenous effort has been bogey of corruption. Often, the Defence Minister is unwilling to move ahead lest he is identified as corrupt. This nature of petty politics has been hampering the growth and strengthening of the indigenous technology and workforce.
Indigenisation in defence can become realistic when the necessary equipment, technology, research, logistics, and infrastructure is in place. India has undertaken several indigenous projects, but almost all have suffered noticeable delays.
(The views expressed are strictly personal.)