Mains Paper 3: Indian Economy| Investment models
From UPSC perspective, the following things are important:
Prelims level: Not Much
Mains level: The newscard discusses flaws in India’s defence procurement policy , Which is threatening national security.
The stain of the Bofors scandal that was unearthed in 1987 has diseased India’s defence procurement ever since. Be it the purchase of howitzers or AgustaWestland choppers or indeed the Rafale aircraft, every Indian defence procurement initiative invites severe political challenge.
Hesitations in procurements
- Given that the Bofors scandal brought down the Rajiv Gandhi government, every Opposition party sees the purchase of any defence equipment from abroad as a political opportunity to attack the government of corruption.
- This has reached such a stage that defence procurement in India has become well-nigh impossible and as a country we are imperilling our security at a time when the world is geo politically unstable.
Comparison with Neighbours
- It is a time when over a 5, 10 or 25 year period, India’s GDP has grown at 7 per cent per annum making India the second fastest growing large economy over the last two decades.
- This year it has even surpassed China’s GDP growth rate.
- But it is a fact that between 2000 and 2015, China went from a $1.2 trillion dollar economy to an over $11 trillion economy while India went from a $0.48 trillion economy to a $2.2 trillion dollar economy, making India only one-fifth the size of the Chinese economy.
- But what should concern us much more is that if we were to do this comparison in respect of defence equipment and overall military might, we would likely be more like one-fifteenth the size of China.
- With respect to Pakistan, the difference in our economic might does not reflect in our comparative military advantage against Pakistan.
- We are today seven times the size of Pakistan’s GDP but the armies and military equipment are much more comparable.
- This is not okay in today’s world as even Japan and Germany are discovering with the arrival of Donald Trump in the US and his taking away the US protective umbrella for them.
Repercussions of policy failure in procurement
- The fact that the Air Force pilot who was shot down by Pakistan recently was flying a MiG-21, termed by many as a flying coffin, is shameful.
- We have no right to talk of ourselves as a global force with such an ancient and depleted level of military equipment. We don’t spend enough, either, on intelligence or defence armaments.
- We have faced at least six major attacks since Kargil — Kashmir assembly, Parliament and the year of standoff thereafter, Mumbai, Pathankot, Uri, and Pulwama now.
Is change possible?
- Today kickbacks from defence procurement cannot be a large part of election funding because our elections cost a lot and our defence procurement is meagre.
- Yet for 10 years Defence Minister A K Antony made sure that no defence equipment was purchased under his watch, as it might stain his clean reputation.
- What we need, therefore, are some rules to ensure that we do not weaken ourselves so much that we endanger the nation.
- We need to ensure equipment gets purchased in a time-bound manner and a certain amount of the annual budget is allocated to defence equipment and that an interparty group approves the final purchases.
Suggestion for defence procurement
- First, we should agree to a certain minimum defence equipment purchase budget as a percentage of our annual budget.
- The Parliament should be informed each year whether the allocated amount was spent on defence equipment.
- Second, we need to create a new institutional mechanism for defence purchase.
- This mechanism needs to both de-risk the officials involved in defence procurement, provide robust oversight and yet be conducted in a time-bound manner.
- There should be three parts to it, including a technical committee comprising defence officials, a separate commercial negotiations team from the finance and defence ministries, including possibly officials from the CAG, and a PM-led approval team that includes the leader of Opposition, CAG, defence minister and possibly the chief vigilance commissioner.
- Each part would need to complete its job within a pre-set time limit that should also be reported to the Parliament.
- Thereafter, these discussions should be kept outside the purview of the media.
- A record of the comments of the approval committee should be viewed by a select joint party committee after a pre-determined time period as a check.
- Any complaints on the process followed can only be made to the Supreme Court, which would hear the complaint and pronounce judgement in secrecy to depoliticise procurement and not allow it to become an election issue.
- Allowing for this challenge, though, would ensure probity.
It is important to create a national consensus on this vital issue to guard our national sovereignty. The time to act is right after the upcoming election.