12 Nov 2020
Posted in Aerospace, Defense & Security
Resumption of defense talks with China puts India’s procurement policy under spotlight, says GlobalData
The resumption of talks at the Corps Commanders level between Indian and China to defuse the tensions around the Line of Actual Control (LAC) has brought India’s defense posture and procurement under the spotlight once again. The talks bring to the fore India’s armed forces, its equipment, preparedness and posture that highlights the need to prioritize quick procurement over indigenization of capabilities, says GlobalData, a leading data and analytics company.
GlobalData’s recent thematic report, ‘Impact of India on Aerospace and Defense – Thematic Research’ focuses on not just the change in policy but also how India’s changes in its defense procurement and how production could impact the larger defense market. The Indian Ministry of Defense (MoD) is anticipated to consistently increase its defense expenditure from US$66.9bn in 2020 to US$74.2bn in 2021. Over the period till 2030, Indian defense expenditure is expected to reflect a compound annual growth rate (CAGR) of 12.91% and increase from US$74.2bn in 2021 to US$120.6bn in 2025. Increased tensions with China as well as Pakistan will drive this further as per the need to replace legacy platforms.
Anthony Endresen, Aerospace and Defense Analyst at GlobalData, says: “Prior to the commencement of the talks, the Chief of Defence Staff, General Bipin Rawat expressed displeasure over the Chinese support for Pakistan on a number of issues and hence, he said that India would not accept any change in its stand on the LAC.
“Of particular interest is the focus of the government to envisage the capability of a larger conflict in the region with Pakistan and China. India’s military response earlier had elicited an emergency order for Spike missiles to deal with any escalation of threat and this was followed on with a second emergency order.”
The increased military activity on India’s borders highlights the impact of troubled procurement policy for a number of years, perhaps best illustrated by the shortcomings of ‘Make in India’ and ‘Make in India 2’ policies. The October 2020 announcement of the removal of the offset requirement for government to government contracts, inter-government agreements and ab-initio single vendor situations highlights the reality facing these policies.
Endresen concludes: “Ultimately, increased tensions with China and its ally Pakistan mean that India has to prioritize procurement and capabilities above these flagship indigenization projects. Magnifying or protracting these talks would certainly serve to emphasize the defense imperative rather than the underlying policy failures in procurement. At a time when India is seeking to become a major defense exporter rather than reliant importer, these are increasingly important calculations.”