Monday 16 April 2018

Arms lobby against India-US defence ties (Sunday Guardian)

M D Nalapat 

Lobbies in Lutyens Zone represent not defence, but foreign business interests.

The specific geopolitical needs of India mandate both a robust defence partnership with the US as well as a comprehensive commercial agreement with China, but are at risk of getting neither because of deliberate foot-dragging on both counts by the Lutyens establishment. Prime Minister Manmohan Singh was blocked both by the Cold Warriors within his party and by the then dominant Clinton clique within the Obama administration from carrying to fruition his effort at a fullscope reset of India-US relations. Prime Minister Narendra Modi had the advantage of the last two years of the Obama administration, when the US President succeeded in reducing the influence of the Clintons over policy, and when Ashton Carter was Secretary of Defense. Unlike his predecessors, Carter was clear-eyed about the need for a refocus to the Indo-Pacific from the Atlantic, with consequent weightage being given to the relationship with India. However, he was blocked in his efforts at taking the military partnership forward by the well-connected and cash-rich foreign weapons lobby in the Lutyens Zone, who was apprehensive that existing foreign clients would lose out, once the US and India came much closer in matters of defence and security. The block on progress continues. In the task of forming a closer business relationship with China, the lobbies working in the Lutyens Zone against such a move represent not defence, but foreign business interests that would find their profits from India constricted were Chinese entities to be given a level playing field with those from the US, Europe and East Asia minus China. Such groups are assisted by the intelligence agencies of the countries that fear business competition from China, and who, therefore, expend considerable effort on convincing their peers in India that China is on the cusp of joining Pakistan in a two-front war against India. It needs to be remembered that a mutually beneficial comprehensive defence relationship with the US and its commercial alternative with China is possible only when agreement is reached on both, as any one of these two potential partners has the heft to drive too hard a bargain for India’s good in the absence of Delhi not having a smooth (albeit different) relationship with the other. The US and China being the only global superpowers, a balanced alignment with both these global giants is necessary.
During the initial stages of moves by the Ministry of Defence to purchase 126 fighter aircraft, the best choice was the Saab Gripen, not just for its cost and performance parameters, but because the Swedish company was willing to be sold to an Indian consortium for much less than the price tag agreed upon for Rafale jets. Such a strategic purchase would have given the same technology boost to our aerospace and defence establishment as Tata Motors secured for itself from the purchase of Jaguar-Land Rover. After the Saab option was rejected by India, the Swedish company was finally purchased by a consortium based in Hong Kong. It became clear thereafter that the (revised in 2014) Eurofighter offer was preferable to the Dassault option, for the reason that Airbus Industrie promised to relocate manufacturing and maintenance hubs of several of its products to India, were the Eurofighter chosen. This included joint construction of not just military but civilian aircraft, as well as space collaboration. Buying the Rafale gains geopolitical brownie points with the French, but going in for the Airbus Eurofighter would have added the UK and Germany to that list. However, this revised Airbus offer was turned down in favour of the Rafale. In the case of the initial US F-16 bid, this was unacceptable, because it was an offer very like that of the present agreement concerning the Rafale fighter aircraft, which is that the aircraft is being sold to India with scant technology transfer or domestic manufacturing capability. Now that Lockheed has offered its entire F-16 production line to India, this deal opens up the prospect of not just the spinoff of technology upgrade, but a market for the (India-made) F-16s in third countries, such as Vietnam and Malaysia. To this would be added the acquisition of some 300 modernised F-16s by the Indian Air Force, besides around 200 more for export. Following on the welcome mat set by Ashton Carter during the final two years of President Barack Obama, the Trump administration too has signalled its willingness to facilitate the add-on sale of the Boeing F-18 to India for use by the Navy in combat operations. It has also made clear that agreement on the F-16s and F-18s would be a first step towards India becoming as close a US partner in defence production and technology, as Israel and the UK presently are. Given such additional advantages, another look at the F-16 relocation offer in the context of the overall geopolitical needs of India is desirable.
In tandem, there needs to be agreement with Beijing on commercial cooperation, and a start would be to permit the Bank of China to open branches in Delhi and Chennai, together with reciprocal rights being given in Shanghai and Beijing to banks where the majority shareholding is Indian. North Block has been attempting to plug the Crony Capitalist gap in the balance sheets of banks in India with moneys that ought to have been expended in filling deficiencies in the lifestyles of hundreds of millions of people in India. It would appear from published reports that much of the savings cornered by the government through low oil prices has found its way into those banks that for unspecified reasons gave loans to Nirav Modi and others who had neither the intention nor the capacity to repay. There is an option to the painful (to the citizen) methods adopted by North Block to somehow replenish the banking system, and that is to have some of the more salvageable of such loans (i.e. those backed by physical assets) transferred to Chinese banks. These have longer repayment schedules and lower interest rates than the banks in India, which would get relief after such a switch. Hopefully, the RBI will not yet again go by the wishes of fund managers in New York and London and once again shoot down proposals for Chinese banks to set up branches in India, for such branches could take much of the NPA burden off the taxpayer’s back.

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