The recycled fashion that is sweeping India is defence indigenisation, a delectable sound byte that allows all who utter it to feel pious without dwelling on what it requires. India’s politicians suffer from addiction to this mantra, and journalists don’t get the column inches they need to cover it (surely Bollywood gossip is so much more important?). Though the country basks in the glory of Kargil and thumps its chest over an occasional successful missile test, defence development and production remains a joke in India.
The list of failures and shocking delays in the country’s defence sector is long. The cloak of secrecy under which research & development in defence operates causes even greater concern about inefficiencies, waste, questionable priorities, and failed or delayed projects the public is not yet aware of. Worse, many heads nod sagely at the mention of foreign direct investment in Indian defence public sector undertakings (DPSU) as if the solution to India’s convoluted woes could be so easily imported. The question of what constitutes indigenisation is itself a tricky one. Would producing defence equipment under license be considered indigenisation? Would allowing foreign defence manufacturers to set up shop in India and procure locally be a sufficient condition?
Many have offered technology transfers and manufacture under license as a solution that would help India leapfrog technological generations. This is an unrealistic assessment, for multiple reasons. First, intellectual property rights may remain with original equipment manufacturer. The impact of this was most visible when US sanctions post-Pokhran II hit the Tejas LCA project. Second, domestic industry may not be able to absorb the technology and may have to import components, reducing the Indian role to mere assembly. Third, countries will not be willing to part with their latest technologies or cooperate too closely with Delhi – despite being an attractive market, India remains non-aligned and hence a question mark in geopolitical calculations.
Offsets are also seen as a mechanism to develop indigenous manufacturing capability. They create jobs, enhance scientific and engineering skills, promote small local manufacturers, and could even lead to exports. They are also, as Transparency International warns, opaque and highly susceptible to corruption. More fundamentally, offsets must come in a value-multiplying form – sourcing aluminium and labour from India may serve the technical definition of offsets but does little to enhance indigenisation. As has been seen after every foreign acquisition such as the MiG-21, T-72, T-90, and others, DPSUs have failed to master the acquired technologies and improve upon them, necessitating further ToTs with each purchase. Operationalisation of manufacturing processes has also remained sluggish in India.
FDI is another oft-mentioned and equally illusionary silver bullet. It is unlikely that foreign investors would agree to transfer critical technologies in joint ventures that cap their investment (and control) at 26 per cent, especially when there is no promise of purchase by the Indian military or even access to export markets and they must operate in an environment strongly biased in favour of DPSUs. The cap is usually defended as a national security measure, but it is unclear what prevents foreign concerns, assuming they would even be interested, from simply obstructing projects to put pressure on Delhi when needed. No wonder then, that FDI in India’s defence sector so far is less than minuscule.
Modernisation is not the same as procurement or indigenisation, and neither technology transfers not FDI will help with the latter. Five vectors pull the indigenisation project in different directions: 1. the military, which is (understandably) only concerned with fighting effectiveness; 2. the DPSUs, who are too busy protecting their own bureaucratic privileges and sinecures; 3. the private sector, who seems to have little faith in Delhi’s long-term vision and therefore is more interested in short-term profits; 4. the political leadership, which remains clueless as ever; and 5. the citizens, who are too jaded to even ask the right questions.
The hard reality is that indigenisation, in the spirit that dependence on foreign sources is nil, is a complex network of operations and dependencies which will take a generation – about 30 years – to achieve fully. Two components of such a project must be human infrastructure and privatisation.
Presently, DPSUs do not feature on the list of dream jobs for most graduates from Caltech, MIT, or Stanford. The bureaucratic environment and the low prioritisation of R&D as evidenced by the paltry budget allocation has resulted in poor facilities and opportunities for employees. In addition, Indian universities have failed spectacularly to produce a rich pool of talent domestically. The shortage of qualified scientists and engineers, something Homi Bhabha had warned about when he put together the nuclear establishment in the late 1940s, has come to haunt Indian R&D and industry.
Privatisation is the other leg of indigenisation. Private firms must be allowed easy entry into the defence sector, allowed to research and develop any product they wish, and solicit their wares not just to the Indian military but to buyers abroad as well. Exports may be regulated through a liberal but effective export controls list and end-user agreements. The export market would encourage private firms to enter defence production as they will not be dependent on the whims of the Indian military and Indian defence bureaucracy. Exports will also allow companies to profit from economies of scale. The government must also push the development of skills in design and manufacture across a wide spectrum of products – chips, hydraulics, supercomputers, weapons-grade steels, composites, engines – at home.
The rapid pace of obsolescence has made it difficult for even private firms to keep up with the latest technological advancements. Universities and the corporate sector must be encouraged to work together to complement each other. Universities must be allowed more autonomy and funded better to establish top-notch research laboratories. Military officials, particularly those in engineering and with combat experience, must be given opportunities for short “refresher” stints in corpo-academic research so that the needs of the forces are clearly understood.
The trick will be to ensure military preparedness while indigenous capability develops. On the one hand, as indigenous capability develops, the products initially will probably not be as good as others available on the international market. On the other hand, a fledgling industry needs the support of steady and large-quantity buyers until it overcomes its learning curve. However, the price of this indulgence could be paid in lives of servicemen and women.
The most difficult part of this balance would be ensuring a successful interlocking set of relationships between the military, private sector, universities, and the political leadership at least over the fledgling period. It is a difficult ask, and that is why no one is talking about indigenisation seriously.