India Is Darling Of Global Defense Firms

By Mark Magnier, Los Angeles Times

India Is Darling Of Global Defense FirmsIndia's military spending plan has arms merchants jockeying for a deal. Their only obstacles are political infighting, corruption and bureaucracy.

NEW DELHI--Sailor-suited Russian models touted their nation's submarines. Indian officers posed for pictures atop foreign-made armor-plated vehicles.
 

 And working the room at New Delhi's aging exhibition center were French, British and American arms merchants from global defense giants, elbowing each other aside in the search for a deal at Defexpo India 2012, the country's biggest-ever weapons trade show.
 

Fueled by superpower ambitions and rivalry with China but hampered by a creaky domestic defense industry, India is on a military buying spree that's made it the belle-of-the-global-military ball.

"India's a little yokel with pockets full of cash and everyone's trying to mug it," said Ajai Shukla, a defense analyst and former army colonel.

India's long shopping list calls for $20 billion in fighter jets, $1.5 billion worth of refueling aircraft and billions of dollars in submarines, tanks and artillery, among other equipment, all part of an estimated $80 billion spending spree over the next five years.

Pakistan once kept Indian generals awake at night. But increasingly that mantle goes to China, with its growing economic and military might and festering territorial disputes along its shared 2,800-mile-long border with India. Adding to India's insecurity are memories of its defeat by Beijing in a 1962 border war.

The situation leaves India increasingly bracing for the possibility of a two-front war given close Sino-Pakistani relations. Its armed forces already battle civil unrest and border incursions in the disputed region of Kashmir, a homegrown Maoist insurgency and threat of terrorists breaching its thinly patrolled coast, as seen during the 2008 Mumbai attack.

The country was the world's largest weapons importer for the 2007-11 period, according to the Stockholm International Peace Research Institute think tank, followed by South Korea, Pakistan and China. Although the Middle Kingdom's annual military budget of $106 billion is nearly three times India's, the rapid expansion of its homegrown defense industry means it produces an estimated 90% of its weapon systems domestically, compared with 30% for India.

A measure of India's unease is seen in plans to add three army divisions totaling 90,000 soldiers along the border. This anxiety isn't shared, however, with Beijing largely focused on what the American military, not India's, is up to, analysts said.

China holds the high ground given the altitude of the Tibet plateau — key in any land conflict — in part because of its superior hardware and better rail and road links. By some estimates, China could deploy troops within a week, whereas India would need three weeks.

"India must at all costs avoid land competition with China," said Endre Lunde, a consultant with IHS Jane's, a defense consultancy. "It just can't end well."
India has some advantages though. Its aircraft take off at lower altitudes, allowing them to carry greater payloads. And India would probably enjoy stronger global diplomatic support in any conflict.

Increasingly, however, Delhi must also contend withChina'snavy, poised to start challenging its neighbor's primacy in the Indian Ocean. Beijing's first aircraft carrier started sea trials in August, and three more carriers are expected in quick succession. And despite its traditional focus on the Taiwan Strait and South China Sea, China is financing port construction in Sri Lanka, Myanmar, Pakistan and Bangladesh and flexing its muscle with antipiracy missions off Somalia.

India has sought a Russian-built carrier for at least four years, but the cost has now reportedly doubled to $2.3 billion after repeated squabbles with Moscow. Two more carrier purchases are planned by 2017. For now, however, India has to make do with a 1950s-era British-built carrier that's on its last legs.

Beyond perceived threats, India is also hoping its military spending will help modernize its design, engineering and assembly industries, project greater regional clout befitting an emerging superpower and help reverse its record of failed indigenous weapon production, cost overruns and delays.

Although waste and cost overruns beset defense industries worldwide, India stands out, analysts said. Lumbering state-owned defense contractors have a monopoly on domestic production. Deadlines are repeatedly blown. Middlemen extract huge fees. Weapons underperform or don't perform at all.

"India's tried since the 1950s to produce most of what it needs indigenously but has failed miserably," said Siemon T. Wezeman, a senior fellow with the Stockholm think tank. "If you're a bright engineer and you want to make a good name, you go elsewhere. "
 

After recent trials on its Arjun tank, commissioned in 1974, India proudly announced it had outperformed the Russian T-90. "But the T-90 is from the late 1980s, early 1990s," Lunde said. "That's not a very flattering comparison. And China's version has moved well beyond the classic T-90."

India's homegrown light Tejas aircraft still isn't operational after 29 years of development, one of several such "black hole" projects.

As procurement and production delays drag on, hardware already in service creaks along, or doesn't, well past its due date. Between 2008 and 2012, India, among the few countries still flying MIG fighter planes, lost 27 of them in crashes, prompting local media to dub them "flying coffins."

The armed services have also been mired in corruption scandals involving real estate, hardware procurement and even coffins. Anticorruption safeguards introduced in response can be so restrictive that they tie purchasing in knots, critics say, undermining Indian security.

This week, army chief Gen. V.K. Singh set off a political firestorm by disclosing that he'd been offered a $2.8-million bribe in 2010, which he said he didn't take — an investigation was never initiated — to approve a shipment of 600 substandard Czech-made trucks. The vehicles, ultimately purchased for $200,000 apiece, by some accounts, sell for half that in Eastern Europe.

A leaked letter he'd written to the prime minister described India's air defenses as "97% obsolete," artillery and infantry in an "alarming" state, and tanks without ammunition. The news broke while Chinese President Hu Jintao was in town for a global conference.
"This is hardly a surprise to the Chinese," said Manohar Thyagaraj, a partner in the New York-based Hudson Fairfax Group, a private equity firm investing in defense. "He didn't say anything that wasn't already known."

Standing beside one of his company's armored personnel carriers at the defense expo in Delhi's crumbling Pragati Maidan convention center, General Dynamics UK senior manager Andrew Boyle said India requires patience.

"It's a difficult market. They do things their own way," he said, as two Chinese attendees snapped detailed pictures of the vehicle. "And it takes them time to come to a decision.

But it's a country with enormous potential."

Tanvi Sharma in The Times' New Delhi bureau contributed to this report.

Courtesy: Los Angeles Times