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The Sacred Cow

India’s dream of becoming an economic superpower looks shattered. Talk of double-digit growth is anything but wild, albeit the Singhs and Chidambarams continue to convince the people that the world’s centre of economic gravity is shifting to New Delhi. Even China is unlikely to overcome steady slow-down of its economy. Many think China has exhausted its development dividends and that its economy will stall in the future. Despite a gloomy and low-key posture as reflected in the current budget presented by Chidam-baram, one area remains a sacred cow for the looters of exchequer. It’s defence. Come what may they will spend billions to modernise Indian defence establishment otherwise plagued by vintage models of ex-Soviet and British origin. They can cut subsidy on fertiliser and cooking gas and abolish social welfare net but they cannot touch defence expenditures.

India has an army of more than 1.1  million, and its air force are among the world’s biggest. The country has 45 warships and submarines under construction, which is the world’s largest naval building programme. A series of defence deals have been negotiated and signed over the past decade, to replace India’s ageing, and mostly Russian, military hardware. India plans to spend $150 billion over the next decades, modernising, upgrading and maintaining military equipment. In 2010, India overtook China to become the biggest arms importer. China depends on its own ability to defend its borders. India’s military expenditure, excluding nuclear weapons was $44.28 billion in 2011, when it imported $3.58 billion worth of arms, most of them still Russian. Over the next five years, the Indian defence budget would rise to more than $55 billion. It has recently come to light that the helicopter company Agusta-Westland and its parent Finmeccanica, the Italian defence and industrial group paid Rs 360 crore as kickbacks, in a Rs 3600 crore deal, signed three years ago, to sell twelve high-tech aircraft to the Indian air force. Despite huge scams and corruption in defence deals, it is the only area where business goes as usual.

When the Agusta-Westland deal was signed, three years ago, India’s economy generated healthy revenues for arms procurement, growing at more than 9% a year. Since the past two years, India’s growth has fallen to 5% annually. The union government of India has been imposing spending cuts to curb the budget and current account deficits. A sudden shortage of money for arms procurement in 2013-14 and 2014-15, India’s attempt to promote its domestic arms industry, and a history of corruption scandals have become main obstacles to international arms deals in India. Armed with nuclear weapons, India has a near successful space and ballistic missiles programme. However, there is scarcely any capacity to produce advanced conventional equipment in India. Even though middlemen arms sales are banned in India, there is no efficient system for procurement.

With America and NATO troops leaving Afghanistan in a year, India is likely to step up defence spending even by sending more people below the poverty line.

Frontier
Vol. 45, No. 38, Mar31-Apr 6, 2013

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