REVAMPING INDIA'S DEFENCE SECTOR

The essence of military endeavour in battle is to pose asymmetric threats to which an adversary has no credible response. Such asymmetries can be created through differentials in technology, doctrine or organisation. An example of US technological superiority was on display in the two Gulf Wars and in US operations in Afghanistan, which enabled early success, though a combination of other factors prevented military success from being converted to a political victory. In the Indian context, the nation continues to face both conventional and non-conventional threats from its two inimical neighbours, the threats manifesting the entire spectrum of conflict on land, in the maritime domain, in the air and in space and outer space. This bespeaks the need to have a strong defence architecture to negate all such threats.

A strong defence industrial base is an essential requirement for India's security and well being. A thrust towards this end was made soon after independence in certain key segments in the strategic domain. India’s first nuclear reactor, Apsara, which was indigenously designed and built, went into operation on 04 August 1956, with nuclear fuel supplied from the United Kingdom under a lease agreement. Since then, India has made huge strides in the field of nuclear technology. India also initiated space research activities in the early 1960s, and is today an acknowledged space power, with ability to launch multiple satellites—from Low Earth Orbit (LEO) to Geostationary Orbit (GEO) and everything in between. The Indian Space Research Organisation (ISRO), established on 15 August 1969, is today, one of the six largest space agencies in the world. It now functions under the Department of Space (DOS) and the Space Commission which were set up in 1972.

India's guided missile development programme is yet another success story. It began in the early 1980s and today, India has developed all types of missile systems including ballistic, cruise, anti-ship, air-defence, air to air and anti-missile systems. From the short range Prithvi Series surface-to-surface missiles, to the Agni 'V' ICBM, which has been inducted into the armed forces, a whole range of surface to air and air to air missiles are in use by the Indian military. India is one of seven countries in the world with ICBM capability and one of four countries with anti-ballistic missile systems. Since 2016, India has been a member of Missile Technology Control Regime (MTCR).

However, despite having a large defence public sector, there have been serious weaknesses in the indigenous production of land systems, as well as platforms for the Navy and the IAF which has impacted India's defence capability. Since the last seven years, however, we are seeing a distinct change in government policies, which are now aiming to establish a strong and vibrant defence industrial base. 

Towards this end, the Finance Minister, in the budget he presented for 2018-2019, announced the setting up of two defence industrial corridors, one in Tamil Nadu and the other in Uttar Pradesh, to achieve self-reliance in the aero-space and defence sectors. Production of defence equipment by the private sector comes with its own set of challenges as the customer base is limited, there is a sensitivity attached to such production, gestation periods are long and they need heavy initial investment to fructify. The progress till date has been slow, largely due to the onset of the pandemic in early 2020. Nonetheless, Tamil Nadu has unveiled its plans to establish an ecosystem to make Tamil Nadu the manufacturing and service hub for the entire aerospace and defence industry of the country, to include both the established large players in the defence sector as well as emerging startups. With the pandemic now receding after the onset of the third wave, a fillip needs to be given to make the defence corridors functional in an early time frame.

In Uttar Pradesh, 1,480 hectares of land have already been acquired for the Defence Corridor. With the elections getting over shortly, the next government will have to move with speed and commitment to get the corridor to functionality in an early time frame. As of now, IIT Kanpur and IIT Banaras Hindu University Varanasi have been roped in for establishment of Centres of Excellence related with Defence Industrial Corridor, Brahmos Aerospace has proposed to set up a unit in Lucknow with Rs 300 crore investment to manufacture missiles and a missile manufacturing unit is also proposed to be set up at the Jhansi node. About 90 percent of the land required for the corridor—1480 hectares—has so far been acquired of which a total of 74 hectares has been allotted to 22 companies in Aligarh, Kanpur and Jhansi. Post the election results in March 2022, the next government will have to work on a war footing to get the corridor to full functionality. Both the defence corridors have the potential to catalyse indigenous production of defence and aerospace-related items and promote growth of private domestic manufacturers, MSMEs and startups in the defence sector.

Self reliance in the aviation sector is vital for India, to reduce its dependency for advanced platforms from external agencies. It was tragic that India abandoned its first indigenous fighter aircraft, the HF 24 Marut, manufactured by HAL, on extraneous grounds. Had we continued to develop the aircraft with upgrades, we could possibly have been one of the major powers in the aviation sector today. There have been delays in the Light Combat Aircraft (LCA) programme that began in the 1980s as a replacement for the MiG-21 fighter aircraft, but the programme has yielded the Tejas fighter—an indigenous fighter aircraft for the IAF and the Navy. This project needs to be fully supported by all the agencies concerned, as only then will India have a viable aviation base. While an additional factory to double aircraft production is being set up, India needs to do much more to enhance production capability as the aircraft has excellent export potential too. The private sector needs to be co-opted in a big way for the supply of components which could assist in increasing production capacity. Alongside, the AMCA (Advanced Medium Combat Aircraft) project also needs to be given greater impetus, as this is India's 5th generation aircraft under development. The Light Combat Helicopter (LCH), developed both for anti-infantry and anti-armour role is another success story as well as the Dhruv—a utility helicopter. Focus now has to be on enhanced production and exports. 

But the aviation sector is not only about fighter aircraft. India needs to consider manufacture of passenger aircraft. While it may not be feasible to reinvent the wheel, it could be possible to get a jump start by simply acquiring the IPR of a product which is in the market, such as the Embraer passenger aircraft. Alongside, India could look into supersonic passenger aircrafts—the next generation of passenger aircrafts which will transform aviation. There is a market for commercial travel which can halve the time for long distance flights. Development of such aircraft can transform and redefine the airlines industry as we know it today and it would be to India's advantage to jump on the bandwagon of this exciting new technology.

The defence sector is gradually being opened to the private sector, which is the need of the hour. While a great deal of time and resources have been expended on the public sector, it still lacks the capacity to meet even fifty percent of the requirements of the Armed Forces. To reduce imports, it is vital that the private sector be roped in, in a substantial manner. Great success has been achieved in certain sectors such as the manufacture of artillery guns, where 100 K9 Vajra Self Propelled guns have already been delivered to the Indian Army. These guns were manufactured by L&T in collaboration with Hanwha Defence of South Korea. The ATAGS (Advanced Towed Artillery Gun System), produced by DRDO in collaboration with Bharat Forge, Tata Power SED and Mahindra Defence Naval System, has been approved for procurement by the Indian Army. It is important that the Indian Army continues with the indigenous route, for only then can the local industry be enabled. Over time, we need to develop own IP for all platforms for the mechanised forces, artillery guns, drones, radars, communication equipment, etc, and the private sector can play an important role in such development.

There is also a need to enable the growth of the SMEs and MSMEs (Micro, Small and Medium Enterprises). Here, it would be instructive to look into the Mittelstand Model. These were small family owned businesses which achieved unprecedented efficiencies by designing a business model with a razor-thin focus and learning to do the one thing really well. Most importantly, they were given an enabling environment by the Government, and these small enterprises soon became world leaders. The strategy adopted was global niche dominance and world class performance in core sectors. While the Government of India is keen to promote the growth of the SME and MSME sectors, the enabling environment will have to be created by the bureaucracy which must be in sync with the larger aims of creating a strong defence industrial base.

Two additional issues need attention. What India needs is technology, but as of now, there is no institutionalised approach to acquiring the same. Structures for the same need to be built for acquiring strategic technologies. The second issue pertains to leadership. The Ordnance Factory Board has been dissolved and the 41 ordnance factories it controlled have been converted into seven defence public sector undertakings (DPSU). These seven new DPSUs to be effective cannot be run on the leadership style as existed earlier. Perhaps the time has come to infuse them with leadership from the corporate world, injecting into the system fresh ideas and accountability and a work culture which is focussed on results, output and profitability. If the seven new DPSUs can be made to perform like the private sector, it will give a huge boost to the Atmanirbhar Programme in the defence sector, especially as the government has opened the defence sector to exports. If India can export the Brahmos missile to Philippines, then there is really no bar to export any other piece of defence equipment to friendly countries. 

In conclusion, a lot of enabling legislation has been made  and the private sector is gradually becoming an important player in India's defence sector. There is an underlying sense of optimism, but ultimately, the user, that is the Armed Forces, the manufacturer, the research organisations and the decision makers—the political and bureaucratic authority, will have to work with each other in a spirit of cooperation, to achieve the desired results. Synergy between these components will act as a force multiplier and will enable India to be a major player in the defence segment within a decade.

Published in Uday India - March 2022

Crisis in Ukraine: Conflicting Narratives

Russia has amassed about 100,000 troops on its border with Ukraine, sparking off fears of an invasion. In addition, on 11 February, amidst the ongoing tension, Russia moved 30,000 troops into Belarus—a close ally of Russia—for a 10 day joint military exercise. This is widely being seen as yet another attempt to coerce Ukraine to toe the Russian line.

To defuse the crisis, French President, Emanuel Macron, on 7 February, held a meeting with President Putin in Moscow and thereafter flew to Kyiv, where he held talks with the President of Ukraine, Volodymyr Zelenskyy for over three hours. As expected, there was no breakthrough achieved in the talks. While Macron stated to reporters that he was "reasonably optimistic but I don't believe in spontaneous miracles," the spokesperson from Kremlin was blunt: "the situation is too complex to expect decisive breakthroughs in the course of one meeting," he said. 

The US has warned of a “very distinct possibility” of a Russian invasion of Ukraine and has asked all US citizens to leave the country. Moving beyond rhetoric, President Biden, in a video call he had with president Putin on 11 February, warned that the US and its allies  would respond “decisively and impose swift and severe costs" if Russia invades Ukraine. The response is unlikely to be a military one and will most likely involve sanctions. This could, inter alia, include some or all of the following:

• Imposing sanctions on the secondary market in Russian bonds.
• Closing the Nord Stream 2 gas pipeline from Russia to northern Europe, which though completed, is yet to receive certification for use by the German energy regulator. 
• Impose full-blocking sanctions on large Russian banks, energy companies, defence firms and also on investment and provision of services to conventional Russian oil projects.
• Sanctions on oligarchs and their families, where sanctions could be imposed on Putin-friendly oligarchs.
• Exclude Russia from Swift, the global electronic payment system, based in Belgium. This perhaps would only be used as a last resort.

Background

The situation that has developed and led to the face-off between Russia and the West over Ukraine can perhaps better be understood through a historical lens. The territory which comprises present day Ukraine has had a contested history. Towards the end of the eighteenth century, following the partition of Poland and the Russian conquest of the Crimean Khanate, the area came under the control of the Russian Empire and Hapsburg Austria. The Russian Revolution of 1917 led to a period of chaos and instability in the region. It was during this time that the Ukrainian Bolsheviks defeated the national government in Kiev and established the Ukrainian Soviet Socialist Republic, which on 30 December 1922, along with Russia, became one of the founding republics of the USSR. Post the Second World War, NATO was created in 1949 as a bulwark against the Soviet Union. It comprised the US, Canada and several western countries.  

In 1954, Nikita Khrushchev, the then Premier of the Soviet Union, transferred Crimea to Ukraine. Crimea had been a part of Russia since 1783, when it was annexed after Tsarist Russia inflicted a defeat on the Ottoman Turks in the Battle of Kozludzha. The reason for the transfer was stated to be the “unity of Russians and Ukrainians” and to the “great and indissoluble friendship” between the two peoples. The real reason, however, had possibly much to do with Khrushchev seeing the transfer as a way of fortifying and perpetuating Soviet control over Ukraine.

In 1990, to get Russian support for the unification of Germany, US diplomats spoke about the non-expansion of NATO beyond East Germany. Russia, accordingly, supported the reunification, which took place on 3 October 1990, but no formal agreement exists which states that NATO will not expand eastwards. In 1991, with the dissolution of the Soviet Union, Ukraine became an independent country, like other constituents of the erstwhile USSR. Subsequently, many countries which were earlier part of the Soviet Bloc, sought and were granted membership of NATO. In 1999, Poland, Hungary, and the Czech Republic joined NATO despite Russian opposition. In 2004, seven Central and Eastern European countries, viz Estonia, Latvia, Lithuania, Slovakia, Romania, Bulgaria, and Slovenia joined NATO. Albania and Croatia joined NATO on 1 April 2009 and more recently, Montenegro and North Macedonia joined NATO on 5 June 2017 and 27 March 2020, respectively. The present face off is a result of Ukraine expressing its intent to join NATO.

Opposing Viewpoints

Russia believes its security interests have been comprised by the refusal of the West to honour its pledge. President Putin spoke of this in a speech he delivered at the Munich Security Conference in 2007, especially as the Baltic countries had joined the alliance by 2004, when he asked, "What happened to the assurances our Western partners made after the dissolution of the Warsaw Pact?" Here, President Putin was referring to the famous “not one inch eastward” assurance given by U.S. Secretary of State James Baker on 9 February 1990, in his meeting with President Gorbachev. This was part of a cascade of assurances about Soviet security given by Western leaders to Gorbachev and other Soviet officials throughout the process of German unification in 1990 and on into 1991, which made Gorbachev agree to German unification. Gorbachov was also of the view that the future of the Soviet Union depended on its integration into Europe, for which Germany would be the decisive actor.

This is however not viewed in the same light by the western powers, who state that the deal only concerned a reunified Germany, with further eastward expansion being inconceivable at the time as no one could have predicted the collapse of the USSR and the historic upheavals that followed. In a major speech in Warsaw, Poland, on June 15, 2001, President Bush lent support to Clinton's policies, when he stated: “all of Europe’s new democracies, from the Baltics to the Black Sea, should have an equal chance to join Western institutions", thus forcefully making the case for NATO's eastward expansion. Putin at that time stated that if NATO were to continue “becoming more political than military” Russia might reconsider its opposition to enlargement. While this was hardly an expression of Russian support for enlargement, it did indicate a Russian desire to accommodate a development that it did not like, but lacked the means to stop. But Putin has drawn the line with attempts to make Ukraine a member of NATO.

What Now

For Putin, the aftermath of the collapse of the Soviet Union under his predecessor Boris Yeltsin in the 1990s is viewed as “a decade of humiliation” in which Bill Clinton’s US “imposed its vision of order on Europe (including in Kosovo in 1999) while the Russians could do nothing but stand by and watch”. If NATO enters Ukraine, then Russia loses a buffer and will be directly confronting NATO. This is perceived to be against the vital security interests of Russia.

NATO, on the other hand,  has an open door policy, which is central to the NATO alliance. The policy, enshrined in NATO’s original 1949 treaty, grants any European nation the right to ask to join. If Ukraine were to become a NATO member, then the alliance would be obligated to defend it against Russia and other adversaries. However, grant of membership has to be by unanimous consent and in the past, both France and Germany as also other European countries have opposed the inclusion of Ukraine into NATO. A war over Ukraine will hurt both Russia and NATO and in the long term, benefits only China which will be watching from the sidelines.

There will be consequences for NATO too. Russia can fuel insurgency in the Donbas region as seen by the ongoing conflict in Eastern Ukraine and NATO will have to grapple directly with ongoing Russian-fuelled conflicts. Russia could also impose other costs on Europe, such as withholding gas exports.

India, while not being directly involved, will, nevertheless be seriously impacted. It has close relations with both the US and Russia and would not like to placed in a situation where it would have to choose sides. It's close relations with the US as well as its dependency on Russian military hardware, including the recently concluded S-400 deal, make the situation more complicated. A rise in energy prices would hit India hard as the country is just recovering from the after shocks caused by the pandemic. More importantly, a conflict in Europe shifts the focus away from Chinese intransigence in the Indo-Pacific, the South China Sea and the India-Tibet border, where Indian and Chinese troops are facing each other in Eastern Ladakh.

An end to the tension prevailing in the region can perhaps only come about with the US and its NATO allies giving a firm assurance that Ukraine will be kept out of NATO, and that the matter could come up for discussion after a period of time—say ten years. This would give enough time for all sides to cool down and review their respective positions. But there is no guarantee that better sense will prevail and we could well be looking into a European conflict which will bruise all the actors involved. Diplomacy is stalling and the threat of war is no longer a distant mirage. 

LEVERAGING SPACE FOR THE SUCCESS OF GROUND OPERATIONS

Geography has placed India between two neighbours, both of whom are hostile and inimical to India’s interests. To the West, India faces a belligerent and antagonistic Pakistan, with which she shares a 3,310 km long land border. To India’s North lies Tibet, which, when it came under Chinese occupation, saw for the first time, Indian and Chinese troops, facing each other across the high Himalayas separated by a 3,448 km long Line of Actual Control (LAC). Chinese hostility against India is premised on keeping India confined to the backwaters of South Asia and towards that end, China actively colludes with Pakistan. As of now, while relations between India and her two antagonistic neighbours remain troubled, the possibility of full scale war is unlikely. In the near to middle term however, China may attempt to annex her claimed areas by force, if the Chinese political leadership is confident of achieving a quick military victor.

In the event of hostilities breaking out with China, the key to victory for either side will lie in information dominance, battlefield transparency and air superiority. Inter alia, both sides will leverage space to get that edge. Space is thus, the final frontier. The criticality for India will lie in monitoring in real time, Chinese troop movement, build up of artillery and logistic nodes, command and control centres, missile bases and aerial assets. This would require continuous satellite coverage over the Tibetan plateau, for which India would need adequate satellites of its own or leveraging information from satellites of friendly partner countries.

Hostilities with China will in all probability begin with a series of non kinetic responses through the cyber domain, where China will aim to cripple India’s network centric warfare capability and neutralise command and control centres. Non military targets such as financial centres may also be disrupted through cyber attacks. Prior to this, however, there will be a concerted attempt at shaping opinion, both within China and across the world. While China has been carrying out perception management operations through its ‘Three Warfares’ doctrine, encompassing media or public opinion warfare, psychological warfare, and legal warfare, there will be a ratcheting up of such activity in the weeks and months prior to the outbreak of hostilities. The cyber attacks would be followed by a series of missile attacks on military targets, before ground operations commence.

India will have to counter Chinese cyber capability by both offensive and defensive means. To counter Chinese ground operations, India would require precision strike capability and a measure of air superiority over the Tibetan plateau. Here is where leveraging space comes into play, to achieve both battlefield transparency as well as precision strike capability. 

Pakistan is no longer a major conventional threat to India, but in conjunction with China, it will impose on India the threat of a two-front war. The criticality here will be to determine the movement of Pakistan’s strategic reserves, which again would require leveraging space capability. 

Whether it is hot war or cold war, or the grey zone in between, the cyber domain will continue to offer almost cost-free opportunities, especially to rogue nations to carry out attacks on non-military targets. This makes cyber-space the most critical domain of future warfare. With rise of AI enabled deep fakes, the cyber frontier is heading for sci-fi like cold war scenarios that is already covertly an active line of conflict for India. India needs to ready herself to counter both hot-war and grey-zone conflict scenarios.

Synopsis for Milit - 19 Jan 2022.

SECURING INDIA'S RISE: A VISION FOR THE FUTURE: Book Review

Since the beginning of 2020, the world is grappling with the Covid-19 pandemic which originated from Wuhan in China sometime in the last quarter of 2019. India too is severely impacted and is currently confronting the third wave of the pandemic, which has hit economic growth across the world. The Indian economy too has suffered, the impact being harshest on the poorer segments of  society, especially in the unorganised sector. India was aiming to be a USD 5 trillion economy by 2025, but the pandemic has delayed that time line. India will, however, eventually not just achieve that landmark, but will thereafter aim to be a USD 10 trillion economy—and India will get there too. India's rise is inevitable and as the 2022 report of the Centre for Economic and Business Research (CEBR) has stated, the Indian economy will overtake Germany by 2031, and with an anticipated GDP of USD 6.8 trillion, be the third largest global economy after the US and China. But there are many challenges to India's rise, some of which are related to geo-political factors and some to the fractious nature of the Indian polity and society.

The book, "Securing India's Rise: A Vision For the Future," edited by Lt Gen. Kamal Davar, looks into the challenges that India has to grapple with. The collection of 19 essays by well known personalities in their respective domains highlight some of these challenges and is a welcome addition to the available literature on the subject. The 19 essays cover a reasonably wide gamut of ideas ranging from the idea of India, to geopolitical considerations, internal and external threats, decision making at the apex level, economic concerns, the digital divide and the fourth estate.

The opening chapter by Shashi Tharoor on 'Law and the Idea of India' delves into some aspects that went into the making of the Constitution and his views on what he believes to be the 'idea of India'. But many of his assertions are debatable. For instance, he states that the 42nd Amendment brought two key principles of India formally into the Constitution—Socialist and Secular. The implication here is that Socialism and Secularism are key principles of the idea of India. But Socialism, as an economic philosophy, has few takers anywhere in the world. As to the insertion of the word Secular into the Constitution of India, it would be naive to think that India is secular because of such insertion. India's secularism derives from its Hindu majority which is accepting of all faiths. The 42nd Amendment was pushed through by Indira Gandhi during the emergency when the entire opposition was in jail. To hold this up as a model to be emulated strikes at the very idea of what India should be and is a contradiction in terms. Tharoor also speaks disparagingly of 'Hindutva', calling it a mirror image of Pakistan. That indicates either a poor understanding of India's civilisational ethos or a deliberate attempt to distort the truth. An essay on Hindutva as a counter to Tharoor would perhaps have set the tone for a more balanced view. The book, The Hindutva Paradigm, by Shri Ram Madhav makes the point most eloquently.

The geo-political terrain has been neatly mapped by Mr Shyam Saran, who has served as India's foreign secretary as also by other authors. The regional and global environment impacting India brings out the challenges that India would continue to face in the foreseeable future. India's security challenges emanating from China and Pakistan have been covered in depth by Prof Kondapalli, a well known authority on China and by Sharat Sabharwal, who has served as India's High Commissioner to Pakistan. With respect to West Asia, the region is important for India to meet its energy requirements as also for the fact that close to eight million Indians live and work there. The subject could have been dealt with in greater depth by KC Singh, especially as the region remains mired in conflict, the more serious being the split on sectarian fault lines. India's foreign policy has been remarkably successful as seen in the growing friendship with Saudi Arabia and the UAE and the nuanced relationship with Iran, which bodes well for the future.

Two former Service Chiefs, General VP Malik and Admiral Arun Prakash have written very succinctly on India's security concerns, both on land and in the maritime domain. Internal security challenges have also been covered in depth by domain experts. Together, they chart out a course for managing internal fault lines as well as addressing external security challenges. 

Mohan Guruswamy has painted a rather bleak picture of India's economy and the trajectory of its future growth. Seema Mustafa, in her article on Indian journalism, laments the fall in journalistic ethics. And Samir Saran, along with Akhil Deo, writes about the emergence of unevenly governed spaces in the technology and digital domains, which have become new theatres of military and economic confrontation. Manish Tewari in his essay on the Covid 19 challenge, posits the need for regulatory frameworks. This is a lacuna in our system, not just in tackling health emergencies but also in dealing with technological advancements which have transformed the way we communicate with each other, how we conduct business and even impact on how future wars will be fought. The wide range of articles on multiple sectors which impact our lives are thought provoking, but finding solutions to many of the challenges is still a work in being.

The Editor of the book, Lt Gen Kamal Davar has juxtaposed a variety of ideas into this very comprehensive book. It is indeed a labour of love. It should be of interest to all those who deal in international relations and security issues and is a welcome addition to the available literature on the subject.

Published in IF Web: Chintan: Feb 2022

 

A Pragmatic Defence Budget in a Pandemic Year

The Defence Budget announced by the Finance Minister of ₹ 5.25 lakh crore marks an increase of 9.82% over the allocations made in the last fiscal. Even after taking inflation of 5.5% into account, the budget marks an increase of over 4% in real terms over the previous budget. This is indeed credible as the defence allocation has to be viewed in terms of the overall rate of growth of the economy following two years of a  pandemic which has impacted growth in which the poorer section have been badly hit and whose concerns and needs had to be dealt with on priority. The defence allocation is hence a strong signal of the governments commitment to the defence of the country in the prevailing security environment.

Of the defence expenditure of ₹5.25 lakh crore, a sum of ₹2.33 lakh crore has been allocated to Revenue Expenditure and ₹1.52 lakh crore to Capital Expenditure. The balance, ₹1.19 lakh crore goes to defence pensions with ₹20,100 crore going to Civil expenditure. This represents a BE (Budget estimate) to BE increase of  9.8% and a RE (Revised Estimates) to BE increase of 4.43% over the previous fiscal. It is important however to see how the Capital revenue is being addressed as this has a bearing on the modernisation of the military and the expenditure being incurred on Research and Development (R&D).

The Capital allocation of ₹1.52 lakh crore reflects a 12.82% BE to BE increase and a 9.89% RE to BE increase over the last fiscal. This is significant in terms of the modernisation effort for the Armed Forces. The Service allocation of Capital Expenditure is Army: ₹32,015.26 crore, Navy: ₹47,590.99 crore and Air Force: ₹55,586.65 crore. 

The Indian Air Force, like in the previous year, had the largest budget allocation for Capital expenditure and is about 4.5% over the allocation in the previous fiscal. This level of support has to be continued over the next few budgets to cater for the shortage of fighter aircraft squadrons and other needs of the IAF, which are now being made up in an incremental manner. The India Army has, however, seen its budget share going down from ₹36481.9 crore in the previous fiscal to ₹32,102 crore in the present budget—a decrease of 12.2%. However, data for 2021-22 shows that the Army has returned around ₹11,100 crore in the last fiscal, which possibly indicates challenges in expending the amount allotted which need to be looked into, the lacuna identified and corrected.

The Naval budget, on the other hand, has seen a massive jump of 43% from the previous fiscal. This reflects the governments concern on maritime security and its renewed emphasis and focus on the Indian Ocean Region (IOR). The Naval budget of the previous fiscal saw an increase of ₹12,767.99 crore (from BE ₹33,253.55 crore to RE ₹46,021.54 crore). In the present budget, the Naval budget at ₹47,590.99 crore reflects a massive increase over the previous years BE and a nominal increase of about 3.5% over the RE over the last year. This indicates the Navy's ability to absorb the funds required for modernisation and its focus on building its capabilities in the IOR, based on the threat assessment.

Another important aspect of the defence budget is the push being given to promote indigenisation through policy changes which will encourage self reliance in defence production. This includes reserving 68% of the Capital procurement budget for the domestic industry and ₹3,810 crore for the seven new Defence Public Sector Undertakings (DPSUs). This should spur both the private sector and the public sector to manufacture locally, both for the domestic market and to make a push for renewed exports in the defence sector. Inter alia, this will also result in reducing the heavy import bill in the defence sector. 

Despite the pandemic, the defence budget has seen a hike in both Capital and Revenue expenditure. This has to be seen in terms of the ongoing threats which India continues to face over her land borders and in the maritime domain and reinforces the thrust on capital acquisitions for force modernisation and building infrastructure for quick and speedy deployment of forces in the required theatres and for maintenance of existing equipment.  

An important highlight of the defence budget was the announcement by the finance minister that Research and Development (R&D) will be opened up for the private industry, start-ups and academia. Of the R&D budget of ₹11,981.81 crore, 25% is being earmarked for the purpose. The private industry will be encouraged to take up the design and development of military platforms and equipment in collaboration with the DRDO and other organisations through a special purpose vehicle (SPV) model. An independent nodal umbrella body for meeting wide-ranging testing and certification requirements has also been announced. 

In the overall analysis, the budget is long-term, looking at force modernisation in a holistic manner. While the budget is focussed on modernisation, it would need to ba accompanied by institutional reforms. For example, the seven defence public sector undertakings need to be put under dynamic management. It may be better to get talent from the corporate sector to head these organisations rather than relying on the civil and military bureaucracy to provide leadership. The emphasis on start ups and R&D is a positive step, but would once again require an enabling bureaucracy for the sector to grow. 

India is at an exciting cusp in its history. The budget is positive. It is now up to the nations bureaucracy to play its part in making India a vibrant defence economy. 

(Sent to Organiser on 2 Feb 2022)