Acquiring capacity or acquiring technology.
The dilemma in India’s defence procurement process — as is with any other major country — is about getting the latest technology versus acquiring a capability that meets a specific purpose. This often creates a disconnect in terms of what the country’s defence forces want and what they really need.
India’s stated preference understandably is to acquire the technology and build the weapons itself. The desire for modern defence technology and eventual self-sufficiency will ideally be the focus of any country. It is presumed that this will automatically bring the requisite capability along the way, rendering the question of an either-or choice between capacity and technology redundant.
This, however, can not mean that the organising principle becomes technology and then you improve your capacity based on whatever technology is available out there. Unfortunately that seems to be the case in Indian defence manufacturing for the last few decades.
A couple of months ago, I put this question to my fellow blogger, Dhruva Jaishankar. Here is an extract from his reply that was lying buried in my email inbox since.
As I see it, we have two objectives, one short-term and one long-term. Our long-term objective – in theory – is to develop the best possible indigenous defense technology, through self-development and technology transfers from those willing to offer it on our terms. This will, again in theory, help preserve our independence of military action while allowing us to compete with the best. I completely agree that this should be our long-term objective, but do not like how this is being executed or brought about.
Unfortunately, because of the poor execution of this long-term objective of acquiring technology, we fall short in our ability to acquire capacity. As a result, we end up making short-term purchases which are purely capacity-driven. This is not bad, necessarily, but is certainly wasteful, as we buy small quantities (meaning no economies of scale) at market prices (meaning no favorable deals). If we are able to implement and strategise our technology acquisition properly, we can in theory achieve both objectives simultaneously: acquire capacity and technology.
The point is rather simple. When the Defence Acquisition Council chooses to make a substantive procurement, it must clearly decide whether it is aimed to build capacity or to acquire technology. The deal-making, including the offsets and transfer-of-technology requirements, would vary significantly for the two. Only in exceptional cases can the goal be to acquire short-term capacity and long-term technology simultaneously, which would require a vastly different kind of deal-making.
Of course, it would assist greatly if the 26 percent cap on FDI in defence manufacturing in India was raised to at least 51 percent. Not that it is going to happen any soon. Alas.