Saturday 24 March 2012

Relying on others for national defence

By M D Nalapat
Sonia Gandhi likes to travel abroad, especially to Europe, and both she as well as her children do so on numerous occasions. The family also welcome numerous relatives from that continent, who come to stay with them in state-provided accommodation for long stretches of time. Such nostalgia for Europe is understandable, for after all, Sonia is herself a child of the world’s richest continent. What is less defensible is the manner in which the government dominated by her has placed the interest of overseas suppliers ahead of those of domestic manufacturers. Unlike the US or the countries of the EU, which always — repeat always — put the interest of home manufacturers and enterprises first, the Manmohan Singh government follows a policy of giving primacy to overseas interests. In the process, Indian interests fall by the wayside. The most recent example is the Commerce Ministry objecting to a proposal by the Department of Telecom to give a few preferences to domestic manufacturers of telecom equipment in the $20 billion market for such wares in India.

As expected, this recommendation generated a firestorm of protest from overseas manufacturers based in the US and Europe. What was unexpected is the way in which Commerce Minister Anand Sharna (who proudly advertises himself as being a “100 percent” follower of Sonia Gandhi) forced his ministry to object in writing to such a policy, even though the suggestion is similar to that followed by the very countries that influenced the Sonia supporters within the government to once again support foreign companies against Indian. Because of the opposition of the Sonia brigade, the Telecom Department is likely to fail in it’s efforts at ensuring that domestic manufacturers of telecom equipment rise in relevance from the present abysmal levels. From the 1990s,the interests of domestic industry have been ignored in favor of giving preference to foreign enterprises. According to senior policymakers, this is because key political dynasties in India “do not trust local companies to keep secret about the bribes deposited by them in Swiss and other banks”. Foreign companies “can be expected to keep secrets and hence are preferred over domestic entities”, is the claim. Small wonder that in almost every major procurement decision of the Government of India, it is foreign companies which claim the lion’s share, usually the whole of the cake. Swiss banks will be getting handsome inflows as a consequence of such skewed decisions. As for domestic manufacturers, they are so terrified of harassment by income-tax and other authorities that they silently accept whatever punishment is given to them. The use of the income-tax and other machinery to blackmail and threaten those objecting to corrupt policies is commonplace. Raids are frequent on those distant from the coterie of Sonia Gandhi, while those close to her are free of such worries. As most of those close to her have strong connections with foreign commercial and other interests, the result is a policy matrix that favors the foreign over the domestic.

Defense is the most egregious example of how policymakers in India have made the country an international beggar, reliant on foreign interests for core technologies and materiel. Whether it is weapons systems or platforms, more than 80 per cent is imported, at a huge cost that runs into the tens of billions of dollars, making India the biggest importer of defense equipment and supplies in the world. After spending hundreds of billions of dollars (and in the process, adding to bank accounts abroad), it is a reflection of the slavery to foreign interests that characterizes the Indian establishment that the country is unable to even produce a small aircraft without foreign collaboration. Contrast this with China, which is en route to producing a fifth-generation fighter aircraft while the Defense Ministry in India sill spend $15 billion on a French forth-generation aircraft (the Raffaele) that had yet tofind a single buyer outside France. The running costs of this aircraft will bankrupt the Air Force, just as the operating costs of the floating junkyard which is the Russian aircraft carrier will cripple the navy. Compare the costs paid by India for it’s Russian carrier and that incurred by China for it’s Ukrainian carrier, and the difference becomes obvious between a system that is based only on greed and that which looks to national interest. Years ago, this columnist favoured asking the US to gift India the USS Kitty Hawk. Had this been done, the giant aircraft carrier would have had at least 15 years more of active service, and would have been a much better option than the Russian vessel,” Admiral Gorshkov”, for which more than $3 billion is being spent by the taxpayer.

The Obama administration has the same India-phobic mindset as did the Clinton team, and if the current US President wins a second term in office, the next four years are unlikely to see any breakthrough in US-India defense relations, besides of course US suppliers of materiel joining Russia, France and Israel in making huge profits out of purchases by the defense ministry, which always prefers foreign companies and ignores domestic manufacturers, thereby making India dangerously dependent on external supply lines in the advent of a conflict.

The only silver lining is that the prospects for such a war seem remote. India, Pakistan and China are each aware of the harmful economicconsequences of war between themselves, and the civilian leaderships of all three countries can be expected to keep the peace. However, apart from self-sufficiency in times of war, another advantage of a strong domestic defines industry is that it can trigger a boost in research and development. A powerful domestic defines industry can result in technological up gradation across the board, to the benefit of the rest of industry. Of course, this can only be in a context where domestic manufacturers are encouraged rather than excluded. Should a future government in India reverse the “Craze for Foreign” ( to use V S Naipaul’s words) policies of the Government of India, then this country may follow China in developing a strong domestic R & D capability.

However, such a prospect seems distant. The Indian political class seems determined to amass wealth for itself. These days, the Gandhian example of simple loving has been forgotten, with 5-star luxury being the norm. The declaration of wealth made by politicians, although usually understated, show the change that has taken place in politics in India. Most ministers are millionaires, and quite a few are billionaires. Even the Leader of the Opposition, Arun Jaitley of the BJP, has declared his wealth at more than 30 billion dollars, owning up to a Mercedes and a BMW. Such symbols of luxury are now the norm in political families, who spend months abroad without anyone asking how the bills get paid. There was a time when Jaitley could afford only a bicycle, but in his case, it must be said that his impressive legal skills have earned him great wealth, just as it has for another legal eagle, Telecom Minister Kapil Sibal, who along with Jaitley is one of the best lawyers in India. These two may have earned their wealth legally, but in that, they are almost unique. Most of their colleagues have become rich through trading in favours, and to a degree that is sickening people across India.

Much of what is wrong in India can be traced back to corruption, whether it be bad roads, dirty hospitals, pathetic schools or miserable housing. The many suffer so that the few wallow in luxury. Clearly, this is not the democracy that is celebrated in textbooks, but another name for exploitation. Only a revival of a mass campaign for accountability can end this state of affairs, which has made India a hpy hunting ground for international arms and other merchants, even while domestic industry suffers from high interest rates, horrible infrastructure and the high costs associated with corruption.

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