Monday, April 20, 2015

India's Militarism

India is the world's largest importer of defense equipment, spending $40 billion annually on military purchases. An IHS Jane's report notes that Asia's third-largest economy is poised to become the fourth-largest military spender in the world by 2020, surpassed only by the U.S., Russia and China.

The right-wing Bharatiya Janata Party, which assumed power last May, promised in its election manifesto to beef up the country's defense industrial base. India's dependence on imports will be whittled down by Modi's "Make in India" campaign. India imports nearly 60 percent of its defense needs, accounting for 15 percent of the world's weapon imports. Eventually, Modi hopes that India will also become an exporter of defense equipment. It has also allocated 12% more of its budget to the military compared with the interim budget tabled by the previous government in February 2014. Though the industry started to change and modernize under the previous Congress-led government, the bulk of the country's military equipment is still imported. On Apr. 10 India announced it would buy 36 fighter jets from France's Dassault Aviation for an estimated $4.3 billion. Sweden's Saab is set to re-pitch their Gripen planes, eliminated in the Rafale tender, as the kind of lighter, single-engine aircraft that Defense Minister Manohar Parrikar said on Monday the air force needed to rebuild its fleet. "We are here and we are ready," said a source close to Saab, which is proposing to establish "fully-fledged production" of the Gripen in India alongside a local partner.  Modi’s government earlier shortlisted Larsen & Toubro and Pipavav Defence for a $10 billion contract to build six submarines. U.S.-based Lockheed Martin, the world's largest weapons manufacturer, formed a joint venture with India's Tata Advanced Systems to produce parts for the C-130J Super Hercules plane.

To facilitate foreign and private participation, the Modi administration last year said it would allow foreign investors to own up to 49% of the equity in Indian defense companies. Other regulatory changes include removal of restrictions on the issuance of annual industrial licences, and those on the sale of controlled products by publicly owned companies to private ones, as well as the decision for the military to order $250 billion of equipment. The Confederation of Indian Industry and Boston Consulting Group states that if India is to achieve its target of lifting its manufacturing sector to account for 25% of gross domestic product, the defense sector has to take the lead.

On March 5, tycoon Anil Ambani’s Reliance Infrastructure paid $132 million for an initial stake of 18% in Pipavav Defence and Offshore Engineering, the country's largest shipbuilding and heavy industry company. It wants to increase its share to at least 25.1% in order to take control, with the intention of becoming "the country's biggest defense manufacturer." The Reliance group subsidiary is also in talks with Eurocopter of France, Kamov of Russia, and Sikorsky of the U.S. about technological tie-ups. Company sources said that the company plans to bid for upcoming tenders to make hundreds of military helicopters valued at about $4 billion. If it wins the contracts, the helicopters will likely be made in a proposed 5,000-acre defense and aerospace infrastructure facility called Dhirubhai Ambani Defence Park -- named after the billionaire's father.

His rival and older brother, Mukesh, who helms Reliance Aerospace Technologies and has a tie-up with France's Dassault Aviation, harbors ambitions to become one of the country's largest manufacturers of combat jets. Tata group, Mahindra & Mahindra, Larsen & Toubro, Punj Lloyd and Bharat Forge are also fighting for a bigger slice of an industry expected to generate $100 billion in revenue over the next decade.

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