India’s Defense Market: Obstacles to Modernization
India budgeted US$17 billion in 2004/05 for military spending, in addition to a carry over of $7 billion from the previous budget. Nevertheless, India Monitor reports that the modernization of India’s armed forces is still a way off as it struggles to shake off “bureaucratic bungling, political wrangling and the more than a sniff of scandal that has characterized arms deals in the past.”
India’s biggest defense-related issue, however, may be more basic: decision paralysis. The slowness of decisions and approvals can be a major issue for companies wishing to penetrate the Indian defense market.
In 1990, for instance, the Indian army asked the government to have their old 130mm artillery guns up-gunned to 155mm One year later New Delhi gave its clearance, and Soltam of Israel was picked from among five bidders. Soltam carried out trials in 1993, but the Defense Ministry took another five years to approve the bid and fulfill the army’s requirement.
These delays have also jeopardized a number of vital purchases, such as the Israel Aircraft Industries Heron unmanned aerial vehicle, the Russian Smerch multiple-launch rocket system and the Bhim self-propelled howitzer. Worse still, over the past five years, inability to make timely decisions has forced India’s Ministry of Defense to return close to $7.3 billion earmarked for new equipment and modernization.
In 2004, India’s parliamentary defense committee declared that the newly created Defense Procurement Board had “miserably failed” to expedite the procurement process, calling on the Ministry of Defense to establish a thorough study to “identify the bottlenecks and take remedial measures to streamline the system”.
The rest of the India Monitor article assesses the obstacles facing new Defense Minister Pranab Mukherjee, the effects of political considerations and broader international sourcing on procurement decisions, and present and future trends. [if that version fails, see the Wayback Machine version]
With American corporations like Lockheed Martin targeting India as a market for its products, the streamlining and modernization of India’s procurement system is likely to have a more direct impact on the North American industry.
Additional Readings & Sources
- India Monitor (May 23/05) – Rising to India’s defense. The Wayback machine version will show it even if the site fails.
- DID – India’s DRDO Rethinking the Way it Does Business
- India’s Business Standard (Nov 20/09) – IAF slams HAL, bats for private sector. Air Marshall Pranab Kumar Barbora, vice chief of the IAF, calls for a far-reaching set of reforms, including much more private sector R&D.
- India Ministry of Defence (Nov 14/06) – Defence Experts Debate R&D And Acquisition Issues
- India Ministry of Defence (Nov 13/06) – International Seminar On Defence Finance & Economics Opens
- DID (March 14/06) – China’s Official Military Budget Jumps Another 14.7%
- DID (March 1/06) – India’s Defense Budget Rises 7%, to $20.11 Bn
- DID (Jan 11/06) – RAND: Chinese Arms Industry Improving
- DID (Nov 30/05) – India’s Defence Minister: Improve Quality, Or Else
- DID (Aug 3/05) New Foreign Procurement Rules in India
- DID (Feb. 28/05) – Slower Growth for India’s Defense Budget
- Sify Finance (May 20/03) – Lockheed Martin Eyes Indian Market