The Lucrative Indian Aerospace Bazaar
With a slice of more than 15 percent of the global aerospace market – both civil and military, currently estimated to be over $ 300 billion per annum with a near double digit projected growth over the next ten years, it is no surprise that the Bangalore Aero-India show has not only attracted gorillas like the Boeing, Lockheed, BAe (British Aerospace) or the European major EADS but also offered opportunities for aerospace chimpanzees (mid-sized companies like Embraer, Israeli Aircraft Industry) as well as marmosets (like HAL).
Sheer magnitude of India’s medium-term aerospace product requirements, both civil and military, seems so staggering that it could match a comparable scenario prevalent during the early decades of the Cold War in the United States, which prompted the then US President Dwight David Eisenhower to appeal to the ‘engaged citizenry’ to weed out the ‘undue’ influence exerted by the ‘military-industrial complex’ (MIC) on the national polity. The only difference is that while the domestic arms industry was considered one of the three pillars (the other two being the Congress and the armed forces) of the ‘Iron Triangle’ in the United States, a hypothetically similar situation could be dominated by the foreign suppliers in India.
Such an alarmist proposition is not only bound to raise many eyebrows but even prompt some to dismiss the scenario altogether. A set of pointers are thus cited here for further contemplation. First, trends in capital expenditure for the armed forces suggest a 300 percent increase in the last five years (it was Rs.12, 000 crore in 2001-02 and has crossed Rs. 36,000 crore in 2006-07). Service-wise allocations under capital heads for the same period have favoured the Air Force and the Navy, cumulatively accounting for more than 70 percent of the allocations. This is primarily because of high costs associated with high-end aerospace and naval systems. A projected $10 billion worth arms purchases is likely in the 11th defense plan (2007 – 2012), bulk of which will be going to the Air Force and Navy. Even a rough estimate of India’s total aerospace assets under both military (remember, the Army and the Navy also have sizeable aerospace assets) and civilian authorities (like ISRO) and the need to augment such sizeable assets, would attract huge investment. It is time to carefully assess the investment trends and their corresponding effects on qualitative military modernization.
Second, bulk of the products unfortunately has to be purchased from abroad. This is primarily because of the fact that despite having a sizeable military industrial complex and a huge defense R&D organization, India has thus far failed to achieve a 70:30 ratio objective of ‘self-reliance in defense’. Although some pockets of excellence exist within the overall defense production and R&D sectors, real term contribution from such excellent efforts have been considered marginal. Not many indigenously designed and developed systems at the higher ends have been inducted and operated by the armed forces for the past fifty years, bulk of the arsenal being filled with either by direct purchase or through license manufacture.
Third, with less than 30 percent of indigenous contribution, bulk of which is considered to be in the lowest ends of the defense production spectrum primarily for the land forces, select domestic producers like the HAL have been encouraged to engage in license production for the past several decades. It is common knowledge that license production can not benefit the domestic producers unless design technologies and development capabilities are mastered through such efforts. Despite all braggadocio, real indigenous components in a few smart products like Advanced Light Helicopter or Light Combat Aircraft or for that matter the Kaveri aero-engine that HAL has been able to produce or demonstrated its capability to produce are subject to scrutiny.
Fourth, as the Indian aerospace manufacturing sector is geared to adopt a strategy of joint design and development, it is likely to encounter problems. Even tightlipped scientists have privately admitted that this strategy is unlikely to pay off desired strategic dividends in the long run. One is not sure about the degree of India’s involvement in the early design stages of the BrahMos, and if reports are to be believed, the joint development of the fifth-generation aircraft between India and Russia has apparently crossed the final design phase, leaving the Indians practically nothing to benefit from such an effort.
Indian aerospace market is bound to benefit the foreign suppliers more than the domestic producers, which in turn could entail significant politico-strategic dividends for the former. If policy issues related to enhance the degree of self-reliance in defense production and technologies, need for both vertical and more importantly horizontal institutional linkages within the defense and civil establishments, prioritization of futuristic requirements based on comprehensive threat assessments, and the need for a healthy public-private partnership are not addressed properly, the on-going confusing scenario could well turn into an alarmist one. The Indian private sector’s role, in such a scenario, must graduate from a symbolic ‘co-piloting’ to a real ‘co-producing’ partnership, while the public sectors must strategize to compete with the global majors.