With the 2014 general election staring us in the face, the Finance Minister, Mr. P Chidambaram, presented a budget that resembles a financial bulwark for the masses – but where defence, like others, has been a casualty in the bargain. India had always been an important export destination for weaponry and defence equipment, areas which were monopolized by USSR during the greater part of the Cold War. Even after many entry barriers were removed allowing Western nations to penetrate the Indian defence market, the lion’s share of the defence pie continued to be controlled by Russia – a trend that is still as much in vogue as it was yesteryear!
And this budget gave India all the more reason to continue the said trend – a glimpse of which is displayed every year during our Republic Day celebrations where our government showcases the country’s military might as tableaus in front of the entire nation. This year, most of the defence weapons displayed were either imported or were assembled using the parts imported from countries across the world. In short, our tableaux were in fact a virtual display of Russian or Israeli military power!
A defence budget of Rs 2.03 lac crore is certainly good news for India but not good enough for it to rejoice because the procurement model itself is fraught with enormous opportunity costs. Plus, the factor of corruption that is being uncovered every now and then in various deals adds to its limitations. General V. K. Singh’s deliberations can be only the tip of the iceberg as there can be more than a few skeletons in the closet. The beginning of the long line of defence scams started with the Bofors scam in 1987 that involved an alleged kickback of Rs.64 crores – an astronomical figure in those days – for the purchase of the Swedish 155mm howitzers. The Barak missile scam in 2006 that had a deal amount of $169 million was tainted by the accusation that the government went ahead with it despite opposition from the DRDO. The coffin scam in 1999 was another blot with cases filed against army personnel and American contractors. And finally, the much publicized Tatra truck scam in 2012 where a kickback of Rs.14 crore was offered – as claimed by Gen V.K. Singh – and subsequently rejected.
For India, having offshore defence deals will only add on to the import bills without concurrent, meaningful, economic advantage. Neither will there be any technological advances, nor would there be any R&D development that could have taken India towards the finishing line of technology optimization. At present, India is ranked 11th in the world in terms of defence spending, with the currently budgetary allocation for defence standing at an impressive Rs. 203,672 crore, enough to make it an enduring market for foreign investment. This magnanimous figure disguises India’s miserly attitude towards indigenisation of the sector. Surprisingly, our government readily trusts foreign private players for defence equipment but finds it tough to create a pool of such manufacturers back home.
Ironically, in spite of being the largest importer of defence equipment since ages, India still has not understood the importance of indigenised defence manufacturing. On the one hand, India alone accounts for 12 per cent of the total global arms trade, whereas our spending on defence R&D is a meagre 2 per cent of global expenditure, compared to 70 per cent by US and 16 per cent by China! Worse, this spending worth peanuts on R&D has not increased since decades. This is not only baffling but also quite worrisome.
Globally, the trend is the opposite. Nations, due to economic meltdown, are cutting down their total military expenditure but have not axed their spending on defence R&D; rather, they have shifted a part of their capital expenditure towards such defence R&D. An inevitable hallmark in the case of defence manufacturing taking deep roots within the country would be sustained employment generation. Already, certain tie-ups – like Tata group with Sikorsky Aircraft and Mahindra Group with BAE Systems – have raised the bar in the defence sector as they involve production of defence equipment in India. If this becomes a viable model, then India’s yearly procurement expenditure of $13 billion on equipment and services can be dragged down drastically through indigenous modelling. Direct interventions in R&D and technology development are critical to nurture the nascent industry.
Back in 2006, I had mentioned how even after two and a half decades, DRDO had failed to come up with an indigenous version of the MiG-21 (which anyway has been described variously as a ‘flying coffin’). The sorry state of our defence manufacturing is clear from the fact that even today, most of our police officers, especially in small towns and cities, are provided with pre-World War II weapons to counter Naxalities and Maoists who attack using semi-automatic machine guns. Interestingly, the mightiest weapon used during the Kargil war was also imported. And why not, every single import gives an opportunity for a scam or embezzlement. Mind you, whatever warfare equipment we are sold in general is actually obsolete or is two to three generations old; the latest ones are kept exclusively by the exporting nations for their own use; a use that is obvious!
Even from the perspective of geopolitics, this is the most opportune time for India to dash ahead with defence reforms. The cross-border tension with Pakistan is at an all-time low in nearly two decades; and like never before, US is sympathetic to India’s stand in negating the threat from China. This comparative smooth passage of time regarding the threat perception from neighbouring countries gives India extra bandwidth to push for reforms and be self-sufficient.
It should take a cue from China, which till 1998 had policy similar to that of India’s; but that nation changed its defence focus dramatically, and as of 2010, boasted of 15,000 plus patents in the defence industry – up from just 313 in 1998! This remarkable shift has taken China to the threshold of catching up with Western powers whereas India is still decaying in the ‘technology-denial’ mode. Similarly, US has virtually merged NASA with its defence research in order to manufacture state-of-the-art defence tools, unlike India, where the DRDO works with no coordination with the so-called defence manufacturers. Merely allocating lakhs of crores to defence would only promise a newer series of corruption scandals, to say the least. What our FM and defence ministry needs is a sense of budget planning, wherein they must allocate a major pie of our defence budget towards indigenous manufacturing and R&D.
These non war times are ideal for such allocations and it is surprising when union budgets increase the defense allocations randomly instead of using the opportunity to encourage a manufacturing base and indigenisation!
The initiative of change must come from the top, as has been the case with China, where Hu Jintao himself was the torchbearer for the growth of science and technology. Otherwise, India might well be buried under the burden of being the world’s largest arms importer – a tag that can prove too costly for the country in the long run. And for this, there has to be a will; will to become self reliant and not will to facilitate corruption. As of now, the will seems to be for the latter, because the allocation for this great cause of indigenisation in this current budget of a whopping Rs.2.03 lac crore is... Any guesses? Well, a similarly mind-numbing total of one crore! Need I say more?
- 07 March 2013 |
- Dr. Arindam on Indian Economy