Considering the strategic and sensitive nature of defence sector, the production of defence equipment had been entirely under the domain of the public sector since 1947. But clamour for the privatization of the defence industry in India started since 1990s when Manmohan Singh further opened the Indian markets to imperialist abuse. With the backdrop of a beautifully orchestrated hostility against China and Pakistan, the miserable performance by our indigenous defence industry created the perfect atmosphere for allowing FDI in it. A decade later, since May 2001, successive governments have succeeded in opening the sector to FDI. The last UPA Government permitted 100% equity with a maximum of 26% FDI component, both subject to licensing and security clearance. Now with the coming of Modi government to power, Indian big comprador capitalists and international capital are demanding immediate pushing through of a raft of socially explosive measures, along with complete deregulation of the Indian defense industry. Recent ‘Made in India’ and ‘Digitalized India’ campaigns are just another attempt to develop positive public perception towards disinvestment and undermine real issues like poverty, starvation and unemployment. Under this flagship of Modi’s ‘Make in India’ campaign, ironically the upper ceiling of FDI has already increased from 26% to the tune of 49%. On the other hand, inspite of ever intensifying global economic crisis, world’s arms trade is growing at an impressive rate of 5.9%. This is a direct fall-out of imperialist far-sightedness, as dissatisfaction caused by imperialist exploitation is being used as a spring-board to promote religious fundamentalism and anarchy across the globe. Here we try to put across a concrete analysis of this current global economic crisis, the ever-intensifying neo-colonial strangulation of Indian economy and its impact on the Indian defence industry, in particular.
Current state of Indian Defence Industry
India has 41 Ordnance Factories (OFs), 8 Defence public sector units (PSUs) and 52 Research & Development laboratories (DRDOs). OFs and DPSUs employ more than 2 lakh personnel and have an annual budget close to Rs. 50,000 crores, while DRDOs employ 5,000 scientists and 25000 supporting personnel with an annual budget of more than 15,000 crores. But contrary to all expectations, this indigenous machinery has failed miserably to deliver on its promises till date. ‘Light Combat Aircraft (Tejas)’ remains a glaring example of such wastage of hard earned tax payers’ money. ‘Tejas’ was supposed to replace the ageing MIG-21s in the early 1980s, and inspite of spending Rs. 17,000 crores on this project in the last 35 years, it still remains a distant dream. The much flaunted missile programmes, submarines, or the Arjun Tank programme, all contribute to the list of spectacular failures. Not surprisingly, a former chief of HAL had suggested a ‘strong import lobby’ behind these unusual delays, so as to make India permanently dependent on imports. This helpless situation provides a convenient justification for the politicians and bureaucrats to push through disinvestment and hikes in military budgets every year. Currently, India is the world’s largest arms importer in the world, with 80-85% of its total requirements met by imports. By contrast, US imports only 10% of its weapons and China 30%. India’s imports rose from around $ 3 billion in 2010 to $6.7 billion in 2014 and are projected to rise upto $ 8.16 billion for 2015. US has been the clear winner, becoming the largest source of armaments’ imports in the last 3 years, surpassing Russia. In 2009, India imported only $200 million worth from the US, a figure which jumped to $ 2 billion in 2013, and under the leadership of Modi, is expected to reach $ 3.3 billion in 2015.
On the other hand, since 1960s, guided by strategic compulsion centered on Pakistan and China, Russia and erstwhile USSR has maintained a hold on its title of the most favoured arms exporter to India, till recently. Exploiting the helplessness caused by Soviet monopoly, neo-colonial strangulation by our so called ‘socialist partner’ in the post Khrushchev era has been so penetrating that at present, almost 70-85% of our Air-Force, Army, and Navy are equipped with military hardware of Soviet or Russian origin, with almost no real technological transfer. In reality, India had been a perfect dump yard for the Soviet’s out-dated defence equipments with severe cost-overruns and delays. Procurement of the Admiral Gorshkov aircraft carrier (renamed as INS Vikramaditya) remains a perfect example for such dealings. The former Soviet aircraft carrier was built in 1978 and decommissioned later due to lack of funds to repair and upgrade the vessel. This scrap was henceforth ‘gifted’ to India in January 2004, along with a compulsion of purchasing warplanes worth $1.5 billion. Since then even after repeated negotiations, this ‘ageing scrap’ is still to be realized, with serious escalation of cost to the tune of $2.3 billion. Recently, under the ‘Make in India’ initiative, Russia with the defense arm of Anil Ambani-led Reliance Group has signed a $925 million deal to make 197 helicopters for Indian Air-force, and a Rs 30,000 crore deal for the refitting of 2 EKM 877 submarines.
Impact of Global Economic Crisis
De-regulation of Indian economy since 1990s has exposed India’s economy to global financial boom-bust crisis. India’s economy at present is mired in stagflation due to the current world economic crisis since 2008. Inflation has long been in the double-digit range. Economic growth began to fall sharply in the 2010-11 fiscal year and has been running at less than 5% for well over two years. Moreover, rapid depreciation of the rupee due to credit crunch and freezing of interbank lending, raised fears of an impending current accounts crisis and has exposed India’s extreme dependence on and vulnerability to, international capital flows. Public spending has been at its lowest, health budgetary allocation reduced by another 5,000 crores, and with cost of food rising by 15% per annum, living standards are being squeezed harder still. Recently India’s National Sample Survey Organization concluded that 16.3% of urban male high school graduates and 30% of those who have university college degrees are unemployed.
British intellectual Jack Waddis once stated that “When global capitalism faces crisis, it takes shelter under two umbrellas: one is religion and the second is arms trade”. Since 1980, US had bombed 14 countries and it continues to support destabilizing military actions throughout the Middle-East, creating a fertile ground for religious fundamentalism to flourish. So, the current US imperialist foresightedness had ensured unprecedented global unrest and contrary to all expectations, global financial crisis has had little impact on military budgets. Last year the world spent some $1.5 trillion on weapons, an annual rise of 5.9%. US accounted for more than half of the total rise, but arms spending increased fastest in China, followed by India. With the 3rd largest standing army in the world, India’s defence budget for 2015-16 stands at Rs. 3.1 lakh crore ($ 49.4 billion), amounting to about one-sixth of the total Central Government expenditure. Out of it, almost two-third of this budgetary allocation is dedicated to acquisition of durable assets including land, buildings, and most profitable of all, weapons. Today arms trade is big business. Global spending has risen by nearly 50% over the past decade. Today 12 billion bullets are produced every year – enough to kill everyone on earth twice over. In fact, every minute, one person is killed by armed violence. There are almost 1 billion guns in the world (of which about a quarter billion are in the U.S.). Three quarters of all the weapons in the world are supplied by the 5 permanent members of the UN Security Council plus Germany. US (44%) tops the chart, followed by Russia (17%), France (8%), UK (5%), China (4%) and Germany (4%). Not surprisingly, India tops the list of the biggest importers of arms, holding a share of nearly 10% of the $63 billion global arms market, followed by China (4%) and Pakistan (4%).
Gifting of India’s Defence to Private Players
Ironically, the Indian big comprador capitalists and international capital are demanding immediate push through of a raft of socially explosive measures which include: changes in land acquisition policies; massive social spending cuts; the curtailment and eventual elimination of energy and fertilizer subsidies; the cutting of restrictions on layoffs and plant closures; a fresh round of privatization of “strategic” public sector units like defence and infrastructure; and the elimination of most limits on foreign investment. The UPA government repeatedly vowed to implement these measures but lost its nerve in the face of massive popular opposition. Modi took this opportunity to convince the big capitalists of himself as their trusted middle-man who could implement these policies at all cost. With these expectations, the foreign big capitalists and Indian comprador bourgeoisie infused huge amount of money in manufacturing a Modi wave through corporate controlled media.
Disinvestment in defence industry is the most lucrative deal of the pack. Apart from being highly profitable, lack of accountability in the name of security of the nation and oligopolistic nature of the industry makes it a very comfortable option for the comprador regime to exploit. Keeping this in mind, over the years, corporate backed media had lobbied round the clock for building consensus among general masses about its necessity and its inevitability. It is being projected to be a lesser evil compared to imports, and since 2001 successive governments have succeeded in opening the sector to FDI.
On the other hand, in 2005 a committee recommended that selected private sector companies should be given permission to build major defence platforms such as tanks, aircraft and ships. A couple of years later, in 2007 another committee cleared 15 companies including Motors, Larsen and Toubro, Tata Power Company, Mahindra and Mahindra, Godrej and Boyce, Bharat Forge, Infosys Technologies, Wipro Technologies and Tata Consultancy Services for Raksha Udyog Ratna (RUR) status. Once awarded, RUR would have granted these companies a position equal to Defence Public Sector Units [DPSUs] and Ordnance Factories [OFs]. However last year, the total military related orders (including exports) for the Indian big bourgeoisie were below $2 billion i.e. less than 6% of India’s total defence spending, as they preferred to stay away considering their incapability to deliver on their own. The comprador character of Indian big bourgeoisie is again exposed as they depend on their offshore imperialist masters for their own sustenance. Furthermore, since 2006, government has even permitted 100% FDI in military production on a ‘case to case’ basis for hi-tech projects, yet not one original equipment manufacturer (OEM) has responded with a proposal. The primary constraint being that there are tight controls on export of proprietary technology by the parent governments and such conditions are legislated by every major armament exporting nations through laws like the International Traffic in Arms Regulations (ITAR) for the US, as well as international treaties like Missile Technology Control Regime (MTCR). This raises a serious question regarding the feasibility of such proposals. 50,000 crore rupee telecom market remains a perfect example of such failures where in spite of 100% FDI, local industry with intellectual property rights within the country has less than 3% share and close to 90% are imported. The bottom-line remains that even in relatively low tech sectors like auto and telecom, the real transfer of technology is almost non-existent, and Indian big bourgeois class remains dependent on foreign big capitalists and retains its comprador character. Moreover, defence is a very sensitive sector. As per a 2013 report, VERINT Systems, an Israeli cyber intelligence solutions provider closely linked with Israeli intelligence services, was to get a contract from the Indian government to aid the Department of Telecommunications in intercepting encrypted electronic communications in India. Another report suggested that MonogoDB, a US technology company co-founded by CIA, entered into a contract with Unique Identification Authority of India (UIDAI), the apex agency for Aadhar card. Sources are scarce and deeply guarded. But they do suggest blatant security violations which undermine the question of India’s sovereignty.
Lastly, corruption is omnipresent in these military deals. The Bofors deal under Rajiv Gandhi is well known. But the Wikileaks report suggests that he was involved in promoting a Swedish fighter during Emergency in the mid-1970s itself, when his mother was at the helm. Recently, the Italian Augusta Wetland helicopter deal worth Rs. 3600 crore had to be cancelled on suspicion of a Rs. 300 crore bribe. Similarly, MoD has put on hold the purchase of Tatra trucks following allegations that top officials of BEML had siphoned off at least Rs. 750 crore in bribes and commissions over the past 14 years. Other examples include HDW Submarine scandal (1981), the Barak missile scandal (2000), the Scorpene submarine scandal (2005), the Ordnance factory scandal, etc. Late Admiral S.M. Nanda became an executive of Crown Corporation, which was raided in connection with the Barak missile scandal. This list is endless; but drives home the point that these politicians and bureaucrats, who are the major benefactors of huge kick-backs, are just puppets in the hands of big corporations.
But the pertinent question remains that why India is still handicapped in defence sector with no actual technological or strategic advancement, even after 60 years of ‘independence’. The answer lies in the comprador character of Indian big bourgeoisie.
Indian Big Bourgeoisie’s betrayal
Indian bourgeoisie’s despicable betrayal can be outlined right from the aftermath of 2nd World War. Defeat of fascists by the Soviet Union under the leadership of Stalin, impending victory of Chinese revolution under the leadership of Mao Tse Tung and US replacing Britain as the world leader in fight for colonial hegemony weakened the hold of British Empire over India. Meanwhile the British were facing militant demonstrations in protest again the trial of INA soldiers, the revolt of the ranks of the Royal Indian Navy which forged the militant unity of all classes, castes and communities, the open rumblings of revolt in the Army and the Air-Force and in general unforeseen revolutionary upsurge of all classes of people in India. Soon they decided to compromise with the Indian big bourgeoisie and big landlords. Congress leaders were set free from jails in no time. In the summer of 1945 (even before transfer of power), an official industrial mission, headed by Mr. G. D. Birla and Mr. J. R. D. Tata visited U.K. and U.S.A to show their willingness to form alliance with big capitalists of imperialist countries. On 21st February, 1946, when Indian soldiers refused to fire on the revolting Navy, Vallabhai Patel, the strong man of Congress, denounced the revolt by saying “There ought to be discipline in the Navy”. Maulana Azad, the then Congress President declared that, “Strikes, hartals, and defiance of British authority are out of place”; and Mahatma Gandhi struck the last nail in coffin when he condemned the Hindu-Muslim unity of naval uprising and militant support of masses as an “unholy alliance”. “That would have delivered India over to the rabble. I would not want to live up to 125 years to witness these consummations. I would rather perish in flames.” Soon a compromise was reached and transfer of power from British imperialists to Indian comprador bourgeoisie and big landlords was completed on 15th August with Nehru heading an interim government. “At last the bride was brought home, but only after she had become a prostitute”. (Karl Marx, 18th Brumaire of Louie Bonaparte).
100 years of British plunder had already liquidated the indigenous mercantile class and it was replaced by a class of wealthy elites, including usurers and big land owners, as brokers and intermediaries to colonial masters. The comprador bourgeoisie was oriented in the sphere of circulation and not production. Thus the consequent failure on their part to evolve an indigenous technology denied them a path of a normal capitalist development. Historically incapable of developing into an independent class, the Indian bourgeoisie, instead of wanting a decisive victory over imperialism, continued to remain its slave and sub-exploiter. On, February, 17, 1948, Nehru declared, “There will not be any sudden change in the economic structure. As far as possible there will be no nationalization of the existing British industries”. Full freedom for foreign capital and enterprise in Indian industry (except defence, railways, electricity, and atomic energy) became the declared policy of India. In concrete terms, foreign aids from imperialist powers forced India to shape up its economic policy as per imperialist interests of big foreign capitalists, right from the beginning. Big comprador bourgeoisie (like Tatas and Birlas) instead of serving national interests helped this very penetration of foreign capital for their own interest. Even in 1955, on the eve of 2nd 5 year plan, 2/5th of the large companies in India with a paid capital of Rs. 5 million and above were directly owned by 17 top British managing agencies.
Over-dependence on imperialist masters was again amusingly evident during the debacle of 1962 Indo-China war, when Nehru wrote two letters to President Kennedy describing the situation as ‘really desperate’ and requesting the immediate dispatch of a minimum of 12 squadrons of supersonic all-weather fighters, two B-47 bombers and setting up of radar communication. American personnel would man these fighters and protect Indian cities from air attacks from Chinese till Indian personnel were trained. Fortunately for India, USA was not prepared to make any commitments, mainly due to their apprehension of annoying Pakistan, then their main ally against China. This legacy of political and economic dependence ambushed scope of any independent development of public-sector industries, including defence.
Neocolonial Plunder (Post 1947)
Out of 14 points drafted by Wilson for “League of Nations, 1919” formed just after the World War-I, the last point suggested the “formation of a general association of nations to guarantee the political independence of all states”. US imperialist establishment was of the view that the colonies, semi-colonies and the other dependent countries have already adapted to the requirement of finance capital as the resources and the markets are already intertwined with the imperialist world system, and continuation of this economic and financial dependency is just what is required. This foresightedness based on practical political and economic implications formed the basis of the present ‘neo-colonial’ or “semi-colonial” imperialist world economic order. ‘Economic aid’ was one of the various plans adopted by imperialism to export capital into the developing world. President Kennedy in 1961 said, “Foreign aid is a method by which US maintains a position of influence and control of the world and sustains good many countries which would definitely collapse or pass into the communist bloc.”
India’s semi-colonial economy is no different and has practically sustained itself on foreign aid since 1947. Out of the total outlay of Rs. 1960 crores for the first 5 year plan, foreign aid comprised more than 10%, of which 70% came from US and 17% from World Bank. This helped US imperialism to influence plan priorities from the beginning. The 2nd five year plan was drafted with the involvement of over 30 economists from various imperialist countries like US and UK. Since the building up of social overheads and infrastructure were less profitable and time consuming, sectors like railway, roadways, coal, defence, etc. were entrusted to the public sector. After 3 decades of Nehruvian model of ‘self reliant’ development, by the end of 1970s India earned the rare distinction of being the biggest aid recipient from the World Bank amounting to around 9,000 million dollars. Political instability, a fall out of ever increasing neo-colonial plunder by imperialist capital, led to proclamation of internal emergency by Indira Gandhi in 1975 which continued till 1977. India being on the threshold of a debt trap, the World Bank pushed India into the IMF lap in 1981. The 5 billion dollar worth of loan agreement with IMF in 1981 was a recognition of the fact that India had succumbed to an irretrievable debt trap which meant larger and larger borrowing to repay constantly accumulating foreign debt. The structural adjustment programmes attached to these loans in 1980s included enforced conditions aiming at downsizing and roll back of welfare state i.e. cut in social welfare expenditures and food subsidy; stoppage of price support and procurement programs; closing down of ‘sick’ PSUs and disinvestment of profitable ones; liberalization of trade, banking and financial markets; liberalization of tax regime; wage freeze with requisite anti-strike law; and a free entry and exit for MNCs. It also replaced the Nehruvian ‘self-reliant import substituting development’ with an ‘import led export-oriented strategy’ which meant more imports to boost more exports. This phenomenon led to further misery when in June 1991, foreign exchange reserves of the country reached $1 billion and India became the largest debtor to private speculators, a status held by Mexico and Brazil till then. This self-imposed strangulation of Indian finances over the last 4 decades became the launching pad of Rao-Manmohan led economic liberalization policy of 1991. It had led to enforcing of further structural reforms which includes elimination of state subsidies including deregulation of industry and agriculture, liberalization of trade and capital flow, disinvestment of profit-making public sector enterprises and financial sector reforms. In essence, these reforms ensure maximum profit for finance capital and the poor countries like India end up financing the expansion and consumption of the richest economies, especially the US.
Past experiences with outright gifting of government assets, from telecom spectrum to coal fields have clearly revealed that along with gorging on tax concessions and cheap labour, the fruits of growth are entirely appropriated by foreign investors and the Indian comprador elite. India, according to the Wealth-X UBS report, now has 109 billionaires and 7730 Ultra High Net Worth Individuals making it the world’s third-largest in number. This is the same India that is home to the world largest concentration of those living in “absolute poverty”, defined as people not getting sufficient caloric intake to do a full day’s work. Three-quarters of India’s population survives on less than two dollars US per day. India ranks 135 in Human Development Index, a measure derived from life expectancy, education levels and incomes. Over 400,000 newborns die within the first 24 hours of their birth every year, the highest anywhere in the world. India’s record on child mortality at 72 per 1,000 live births is worse than that of even Bangladesh. One in every three children below 5 years suffer from chronic malnutrition, whereas two million children under five years of age die each year in India, one in every 15 seconds, both highest anywhere in the world.
French litterateur Anatole France wrote a hundred years ago: ‘A people living under the perpetual menace of war and invasion are very easy to govern. It demands no social reform. It does not haggle over expenditures for armaments and military equipment. It pays without discussion, it ruins itself, and that is an excellent thing for the syndicates of financiers and manufacturers for whom patriotic terrors are an abundant source of gain.’ On the other hand, it is erroneous to think that this popular anger over price increase, unemployment and corruption will lead to automatic collapse of this exploitative economic order. Capitalism will continuously strive to overcome its own crisis by contradictory enforced destruction of a mass of productive forces, by further intensifying the exploitation of existing markets or by colonial or imperialist conquest of new markets, and thereby creating more monopolies. The current prevailing crisis in the Indian Defence Industry has once again reaffirmed the true ‘comprador character’ of the Indian big bourgeoisie, exposed the parasitical ‘neo-colonial’ strangulation of our economy and subsequent ‘subversion’ of nation state to imperialist forces through the arms trade.