THE BIG BUSINESS OF DEFENCE


India is today amongst the largest weapon importers in the world and is expected to import weapons worth USD 200 billion or more over the next decade. It is thus no surprise that the current NDA government is keen to make India a ‘global manufacturing powerhouse’ on par with China, which has over the last decade turned from being one of the largest importers of weapons to one of the top five exporters. In contrast, the poor track record of India’s defence PSUs – the chosen ‘sarkari’ favourites – in delivering defence items to the security forces on time and within the budget, leaves little room for optimism. But this could change if the Raksha Mantri and the top bureaucraticmilitary leadership are willing to re-invent the wheel and demand time bound delivery on projects, once specifications are agreed and frozen. And simultaneously overhaul our defence PSUs which reek of nepotism.

Despite our long standing desire to develop India’s domestic defence manufacturing base instead of resorting to short-term modernisation efforts, we have continued to depend heavily on imported systems, as the armed forces reject many of the local products that were manufactured as ineffective or outdated, since this process of creating a major weapons platform can take up to 15 years or more. And with successive governments insisting that our public sector undertakings be allowed to develop almost everything that our forces need, the private sector has largely been denied the opportunities to enter this domain. Apparently, one reason why the Rafale fighter jet deal has been endlessly delayed is because the French want to have the bulk of these jets manufactured in partnership with a private sector Indian company, but the government insists this should be done with a PSU.

And even if some Indian companies can rise up to the challenge – and that could take several years – there is an urgent need to address the critical gaps in India’s military capabilities. For instance, the collective requirement of helicopters for the three services and the para-military forces itself is for 800 helicopters of various types, requiring an immediate investment of USD 12 billion. By 2027, India will need over 450 fighter aircraft and over 200 warships to acquire some serious blue water naval punch. Add to that the Army’s immediate need for tanks, missiles, artillery systems, and better assault rifles to match the global favourite of terrorist, the AK-47. The demand for rifles itself (to replace the sub-standard INSAS) could be in the range of at least half a million rifles. All this requires billions of dollars in capital investment.

But ironically, despite being a huge market for arms sellers, it isn’t easy to crack defence deals in India. With across the board black-listing of a large number of equipment manufacturers (OEMs) – in the wake of the AugustaWestland scandal- plus the reluctance now of politicians and bureaucrats to finalise deals for fear of scandals, along with dwindling capital funds outlay for purchases, would barely allow India to counter a two front threat from China and Pakistan, which are both increasing their offensive capability by the day. And even though an Indian Parliamentary Committee report had stated that 3 percent of GDP must be spent on defence, we currently spend about 1.8 percent of GDP on defence. In contrast, NATO countries, that are safe under a US military umbrella spend 2 percent of GDP on defence. A western study suggests that India must spend from 4 to 6 percent of its GDP, to have a world class military force. But that perhaps, will never happen.

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