India’s new Prime Minister Narendra Modi is galvanizing his administration to clear long-pending defense projects that will bolster India’s operational military capabilities, stepping up reforms and raising limits on foreign direct investment in defense production to 49 percent from 26 percent.
India’s defense establishment has long been so riddled with corruption that its previous Defense Minister, AK Anthony almost stopped ordering equipment for fear of kickbacks and bribery. That has heightened India’s geopolitical vulnerability at a time when the country is caught between an expansionist China, with which it shares a disputed 2,500-km border, and an imploding Pakistan.
The withdrawal of NATO troops from Afghanistan and the ensuing tension the situation may trigger has done nothing to assuage the department’s worries. At one point, during an extreme provocation by Pakistan, India’s general staff counselled against a military strike because they didn’t think the Indian Army was capable of taking on Pakistan.
Now the Defense Acquisitions Council headed by Defense Minister Arun Jaitley is determined to get things moving, however, clearing a slew of proposals worth over US$140 billion over the weekend.
They include building six new stealth submarines with foreign collaboration in India as well as deals for anti-tank guided missiles, midget submarines for special covert operations, Dornier aircraft and Russian Uran missiles for warships and the like. Purchases of Israeli “Spike” tank-killing missiles, and 321 Israeli Spike launchers and 8,356 missiles also on the list among others.
In a bid to push forth its agenda to privatize defense manufacturing, the right-wing Bhartiya Janata Party government has also greenlighted a deal between the Tata conglomerate and French aircraft giant Airbus to manufacture transport planes for the defense sector. The synergy marks the first big-ticket entry after the FDI limit hike in defense production in August.
The Modi administration earlier faced criticism for not allowing majority control in defense for foreign partners, leading to a widespread apprehension that this might deprive India of a chance to upgrade its antiquated weaponry and partner with world-class players in the crucial sector.
However, in August the Union cabinet approved raising FDI in the sensitive sector to foreign firms. The cabinet also decided that FDI beyond 49 percent would be allowed in state-of-the art defense equipment manufacturing, with technology transfer under Indian control and management. As a safeguard, the Cabinet Committee on Security will approve all such proposals.
“With the Modi government embarking on a ‘Make in India’ campaign to turn India into a global hub for low-cost quality manufacturing, the defense sector figures prominently in its strategy. We’ll be hearing of more and more such big ticket announcements,” said Rakesh Pawar, a consultant to the ministry on defense purchases.
Under the previous political coalition, India faced a long list of scandals in defense procurement deals that deprived the military of state-of-the-art defense equipment. In January, it cancelled a deal with the Italian-owned AgustaWestland to buy 12 luxury helicopters after a 15-month government probe amid allegations the company paid bribes to win the US$753 million contract.
However, analysts say Modi’s plans bode well for India’s overall defense preparedness. On the campaign trail this summer, the PM promised a strong India, able to stand up to its adversaries. The current flurry of changes is regarded as keeping with that commitment. He also mentioned that the timely, cost-effective and corruption-free purchase of defense weapons and other equipment was critical for the military.
“The ideal situation is an efficient procurement system leading to timely and cost-effective procurement of quality defense equipment, done in a transparent manner,” Modi told reporters.
Prioritizing military modernization, the PM dedicated the largest indigenously built guided-missile destroyer in August, and vowed to boost defenses so “no one dares to cast an evil glance at India.”
The Modi government has also removed bottlenecks on procurement from defense manufacturers affected by graft allegations. Purchases from six foreign companies, including Rolls-Royce Holdings Plc (RR/) and two local businesses that earlier faced curbs are now permitted. Five other foreign companies – Finmeccanica SpA (FNC), Singapore Technologies Kinetics Ltd., Israel Military Industries Ltd., The Corporation Zashchita and Rheinmetall Air Defense AG – will also now be able to conduct business in India.
Modi’s administration in August allowed Finmeccanica, involved in projects in India ranging from air surveillance radar and the supply of missile, also to continue with existing procurement contracts, while barring it from new defense tenders.
Be that s it may, India still has limited options for defense purchases from overseas players. Recognizing this handicap, Defense Minister Jaitley said recently that: “There are a large number of firms which have been blacklisted. That upholds the consideration of probity. But that narrows our buying options. When it narrows your buying options, it can affect security preparedness.”
A resource crunch has further compromised India’s ambitions to overhaul the sector. The Indian defense budget has shrunk to less than 2 percent of the country’s GDP, the lowest in five decades, inhibiting higher investment in the sector at a time when the new government is keen to expand its presence in the region and on the world stage.
Even though India surpassed China in 2012 to become the world’s largest importer of major conventional weapons, according to the Stockholm International Peace Research Institute, many problems continue to thwart the country’s battle worthiness.
Certainly, Modi’s defense agenda is an empowering one – raising FDI caps in defense manufacturing; opening up procurement to the private sector; boosting military spending; and cleansing the entrenched defense bureaucracy while spring cleaning the higher echelons of the defense ministry. Modi may also well be able to achieve much of it given the buoyant mood in party and the majority support he enjoys in Parliament to push his agenda forward.
Even so, as Sadanand Dhume and Gary Schmitt point out in an article in The Weekly Standard, many of the problems can’t be fixed with immediate infusions of money or even changes in laws. “Those may help,” write the duo, “but modifications in the culture of institutions and management require a capacity for sustained commitment that is increasingly rare in modern democracies. The natural tendency will be to adopt changes that are easy to see and produce quick results. But unless root-and-branch reforms are tackled as well, the odds of the system falling back into its old ways are high.”
In short, when it comes to India reaching its optimal strategic potential, Modi and his men have a long and arduous battle ahead of them.
Neeta Lal is a New Delhi-based journalist and regular contributor to Asia Sentinel. Follow her on twitter: neeta lal@neeta_com