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4 July 2012, Gateway House

Revitalising India’s ailing arms industry

Various unfavourable factors, attributed to both the government and the military, have resulted in dubbing India as the world’s largest arms importer. These factors – corruption, political interference and bureaucratic lethargy – have contributed to an absence of clarity on the use of arms in diplomacy.

Brigadier (retired)

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India is today the largest importer of arms in the world, comprising 10% of global arms imports from 2007 to 2011. It has overtaken China, the largest importer of arms during 2002–2006, which fell to fourth place in 2007-11. The decline in the volume of Chinese imports coincides with improvements in China’s arms industry and its growing ability to export arms.

Can we assume, then, that India too will follow China’s path, reducing its imports of arms while improving and building indigenous capacity so that it can become an eventual exporter?

Judging by the present context, this seems to be a remote possibility. India lacks a significant defence manufacturing capability and spends precious foreign exchange on importing defence items that could easily be made within India. The money spent in importing arms is enormous. India’s defence budget for 2012-13 of Rs. 193407.29 crores has increased by 17.63% from 2011. The ratio of imports to domestic production is abysmal – over 50% and by some estimates even 70%, of our defence goods are imported. So being the largest global arms importer only reflects the malaise—that our internal arms production must truly be ailing on all counts.

It is worthwhile to examine how we reached this juncture.

Several players are involved in the expensive transactions of the arms industry—the Indian government, research and development agencies, the manufacturers and the users—the armed forces, the police and paramilitary forces.

The most important of these players, the government, has been remiss on three major counts: the first and most critical is the lack of a clear national policy on the use of arms in diplomacy—a policy that would cover when, where and under what circumstances  the nation would use force, and the possible contours of future conflicts.  Such a policy is vital for the armed forces to develop a strategy and balanced tri-force structure. Without such a policy, arms acquisitions devolve into turf wars over fancy equipment and budgets.

The Medium Multi-Role Combat Aircraft (MMRCA) deal is an example. In January 2012 France’s Rafale bagged India’s biggest-ever contract for supplying 126 combat aircraft for the air force in an approximately $17 billion dollar deal. In the absence of a comprehensive national security doctrine, can India afford high-cost acquisitions like the MMRCA?

Secondly, the government has been negligent in its handling of the Defence Research and Development Organisation (DRDO). Due to economic or political reasons, the government has allowed, and even subsidised, huge inefficiencies in the DRDO.

The DRDO was set up in 1958; its stated mission is to “provide our defence services a decisive edge by equipping them with internationally competitive systems and solutions.” The DRDO now has more than 50 laboratories which attempt to develop defence technologies ranging from combat equipment to life sciences and agriculture. The organisation employs more than 5000 scientists and 25,000 supporting personnel.

Despite its huge size, the DRDO has failed in its mission. Even 54 years after the DRDO was started, India imports the bulk of its defence equipment; the DRDO has produced little of usable value.  The list of failures is long: in addition to missiles, other equipment such as the Main Battle Tank Arjun, the Unmanned Aerial Vehicle Nishant, the Light Combat Aircraft Tejas, and the INSAS rifles—have all been thrust on users despite unsatisfactory performances during trials.  This has eroded the confidence of the armed forces, which prefer to look abroad for equipment for the Indian government to purchase.

India’s ordnance factories have their own set of problems. Some of the factories are 200 year old colonial remnants. There are more than 40 ordnance factories in the country, which manufacture military items ranging from guns to clothes. These factories are plagued by union problems, poor quality, high costs and limited capacity.  There have been fatal accidents in the armed forces involving arms and ammunition manufactured by these factories. Together, these factors have seriously eroded the confidence of the armed forces in the capabilities of the ordnance factories.

Thirdly, the government has been imprudent about limiting foreign direct investment (FDI) in private defence manufacturing to 26%. This inhibits the private sector from acquiring contemporary defence technology because foreign firms are reluctant to part with expensive technology for such small returns. Perhaps the FDI limit is in place to ensure that a viable alternative to the DRDO-ordnance factories combine does not emerge.

The armed forces too share the responsibility for inhibiting India’s manufacture of defence equipment.  Poorly drafted requirements, inappropriately qualified personnel in acquisition and trials departments, and the lack of a long-term equipment plan have all contributed to an absence of clarity. For example, artillery trials, in which some of the world’s best manufacturers took part, were carried out at least three times since 2001, but no gun has still been selected. The high cost of such trials has inhibited the leading manufacturers from participating in subsequent bids.

All these stumbling blocks to the development of Indian-made military equipment intertwine with other factors like corruption, political interference and bureaucratic lethargy.

Several steps can be taken to rectify this undesirable situation. The government must ensure that the DRDO and ordnance factories become capable of competing with private manufacturers; this will also ensure that they become commercially viable and rid of problems such as bloated wage bills and inefficiency.

At the same time, the government must make it attractive for the private sector to enter the arena of arms manufacture and allow private players to access contemporary technology. Immediately increasing the level of FDI to the 49% that the industry is asking for, will help. If the Indian or multinational private sector were to become seriously engaged in defence manufacture in India, our dependence on imports would drastically reduce.

If we start to take such measures to awaken our somnolent arms manufacturing sector, the industry will thrive, India will break away from expensive imports, and we could gradually become a net exporter.  In the past, neighbours such as Nepal, Myanmar and Sri Lanka have wanted to buy defence equipment from India. We were unable or unwilling to supply the equipment and these potential buyers turned elsewhere, mainly to China and Pakistan.  We should eventually build an export-base in the low-technology markets in the region and elsewhere. All these measures will in turn also reduce the costs of equipment for our own armed forces.

Xerxes Adrianwalla is a retired Brigadier of the Indian Army and a regular contributor to Gateway House: Indian Council on Global Relations.

This article was earlier published in South Asia Monitor here.

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