Aero-India 2009: Beyond the Camel Corps

To be a dominant Asian power, India requires to consolidate and integrate the genius of the private sector with the existing national assets to build state-of —the-art defence industries that will enhance its military prowess. Unity of purpose will enable New Delhi to defend its expanding economic interests in a globalised environment and permit it to speak from a position of strength in the existing hostile neighbourhood.

However, to achieve the twin goals of becoming an economic powerhouse and the ability to militarily defend its riches and democratic values, it is essential that we exploit the favourable international environment for deep military technology transfers. This alone can modernise the defence industries. Therefore cutting edge thinking at the political level is essential, too.

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With the increasing fundamentalist upsurge, most of the Islamic countries continue to regress and therefore remain technology-deficit. China at best is a ‘reverse-engineering’ genius. None of these countries, in any case, will be eager to improve India’s military might. Technology transfer from Russia is possible but only to a point. Most of the Russian technology available is archaic and requires transfusion from the West.

The West has the latest technologies and weapon platforms that India needs to equip its Armed Forces to face the combined threat posed by authoritarian regimes on its land borders. While communist China is denied acquisition of advanced sensitive military technologies by the Western alliance, there exists a unique opening for New Delhi to access these. This can help create a formidable defence industrial hub in Asia, if the opportunity is seized.

The threat perception on two specific counts dictate that India rapidly modernise its Armed Forces as well as its internal security apparatus.

First, public confirmation by Islamabad that China-Pakistan axis threatens India jointly dictates swift modernisation of the armed forces.

Second, the inevitable Talibanisation of Pakistan and Bangladesh creeping towards our borders threatens to destroy the multi-cultural social fabric of India. It is imperative that the threat from Taliban is contained and destroyed within Pakistan. To neutralise these two threats, the military requires extraordinary offensive capabilities, which are available with the West alone.

To develop India into a major low-cost high-end R&D base and defence industries hub in Asia, New Delhi should generate intelligent policy shifts to create a business friendly environment that attracts frontier technologies.

It was pompous of the Defence Minister at Aero India 2005 to announce that “The defence sector has been opened up for private investment and it is not that we are dying for investment. It is for the interested companies to make necessary investment.” Such diplomatic gaffes dampen the confidence and enthusiasm of the foreign investor.

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Instead of re-inventing the wheel, we need to leapfrog the technological gap by accepting deep transfers of technology against the offset clause. This in turn will subsequently ensure that we have world-class equipment to export.

To attract FDI in the defence sector, the foreign investor’s stake should be raised to 49 percent from the existing 26 percent. To instill confidence in the foreign entrepreneur, increase his share to 51 percent where cutting edge technology is brought in.

General Mrinal Suman, the leading defence industry expert, is categorical that, “The Government must provide adequate freedom to a foreign investor to cater to market dynamics, albeit within the broad regulatory policy framework. He should not feel stifled or handicapped due to excessive monitoring by the bureaucracy.”

Primarily FDI is influenced by stable and favourable investment climate, economic freedom and a fair market access. Therefore for New Delhi to expect that the foreign investor will invest his resources where he exercises no significant control, cannot access other markets within the country or for exports, and is restrained by strict capacity controls instead of scales of economy, is unrealistic. Indian bureaucratese and government over-regulations are perceived to pose the biggest risk to his investment. This perception needs to be corrected through intensive dialogue.

The Defence Minister should announce slew of measures to deregulate the defence industry sector during Aero India 2009. We need to incorporate the genius of the private sector to compete with the sluggish public sector, increase the legitimate stakes of the foreign investor in the economic pie as an incentive, and announce India’s readiness to join the ‘global factory’ concept with West. A technologically advanced and vibrant defence industry is critical for India’s security and its global aspirations. Therefore, it is time the MoD fine-tunes its policies by bringing them at par with the existing international business norms, instead of living in a mental ghetto.