Is FDI The Mantra For Modernising Indian Military?

When FDI is being actively promoted for all other sectors, why shouldn’t the Indian Military benefit from the same? Let us take a quick look at the pros and cons before the D-Day on July 10, when the newly elected Narendra Modi government will present its first Union Budget.

Current scenario
Even though India is the world’s largest importer of arms and has one of the biggest armed forces in place, it is mostly dependent on outdated Soviet equipment and technologies. The situation is further aggravated by a largely public sector arms industry, lacking the latest technologies for producing modern arms. It mostly makes ballistic missiles and functions as assembly lines for imported jet fighters. Worse still, the DRDO (Defence Research and Development Organisation) has not kept pace either with emerging and new defence technologies. The Ministry of Defence shot down the proposal for increasing FDI in defence by raising the bogeyman of security reasons and the need to protect the local arms industry.

Impact on the Indian Armed Forces
There has been a spate of fatal accidents due to outdated or defective equipment, along with problems related to spares and repairs. The most tragic incidents involved the submarine fleet. The Air Force, too, has had its share of loss of lives in air crashes.

Morale of the Armed Forces – an overlooked factor
Asking men to fight with defective and ageing equipment is like asking them to fight with one arm. It can adversely affect troop psychology and morale.

Why India should modernise its weapons?
Past cross-border wars and ongoing infiltrations from Pakistan and China make it necessary that India should be prepared and well-equipped to meet these challenges. After all, more than 50% of China’s arms exports go to Pakistan. Moreover, the ongoing Iraq crisis may move closer to home with disastrous consequences. Also, India has a coastline spanning more than 7,000 km to patrol and defend. China’s increasing presence in the Indian Ocean is another worrying factor for the defence forces of India.

Western arms industry set to benefit?
Billions of dollars are involved and there is keen competition to have a slice of the Indian arms pie. Last year, India imported $6 billion worth of arms and armaments, and this number is expected to grow. In contrast, the market for Western arms industries is shrinking and newer markets are required to support economic growth. Narendra Modi, the newly elected Prime Minister of India, has earlier made it clear that he is keen to strengthen the military and want to transform India into an arms exporter. India will be looking more towards sharing of technologies and manufacturing facilities for churning out finished products and won’t function like assembly line units.

India’s Department of Industrial Policy and Promotion (DIPP) has recommended 49% FDI where no technology transfer is involved, 74% in cases of technology transfer and 100% for the manufacturing of state-of-the-art equipment. We need to wait and see how far the FDI ceiling will be raised by the new government.

Western countries looking to ink deals
Traditionally, Russia has been the top supplier of arms to India and it was the first to hold talks with the new government by sending Deputy Prime Minister, Dmitry Rogozin. However, all is not rosy for the Russian Bear. India is dissatisfied with its outdated technology and upset about the recent Russian offer to sell Mi-35 attack helicopters to its neighbour Pakistan with whom it has long-standing border and terrorism problems.

France rushed its Foreign Minister Laurent Fabius to India, hoping to finalise among other deals the long-pending Dassault Aviation business for 126 Rafale jet fighters, worth over $15 billion. And the US wants to cement its very recent position as a leading supplier of arms to India. U.S. Senator John McCain from Arizona, which has arms manufacturers such as Raytheon and Boeing, expects his visit to be successful in helping the arms manufacturers in the US. He has advocated to the US Senate that it should support and augment India’s economic and military growth. The UK is also likely to depute its Foreign Secretary and Finance Minister, seeking to swing the deal away from Rafale to it Eurofighter Typhoon jets.

National security
Specific safeguards can be included in the contracts and licenses, granting India the right to take special steps during national emergencies.

Wooing FDI
A higher percentage of FDI is required as investors will invest only if they have a say in controlling their investments. Therefore, India will have to promote a stable environment with clear cut and fair economic policies. Political stability, combined with a skilled workforce, plenty of raw materials, low production costs and a profitable market will attract investors. But the bottom line is profit.

FDI in the defence space with proper safeguards and well-thought-out policies will strengthen and make the Indian forces better equipped to do its duty. Apart from mutual economic benefits, FDI will also encourage and promote research and development in the defence sector in India. As India aims for greater economic presence globally, it will need matching military clout to make its presence felt.