Lessons from the defense industry of India

The  demand  in military circles should reflect political and bureaucratic choices which maximize the capacity of defense budgets to finance strategies. However, political forces may redirect decisions in the way that maximizes the function of social utility of the national budget, conditioning strategic alternatives to non-optimized strategic arms systems for security demand. That implies that when there are multiple valid alternatives in function of the utility of the defense technological-industrial complex, a large number of production models equally valid may be designed.

This equation reflects the tension between the two logics. On the one side, we have the instrumental rationality of the force projects, in the form of systematics of conception of the articulated defense capacities, which see the defense industry as a factor of self-sufficiency of the logistics of production and maintenance of vital arms systems. According to this logic, the defense technological-industrial complex of a country is a national asset which must be maintained to assure the capacities that a nation believes may be necessary for the future, even though that may burden with costs its economic and financial inefficiency. On the other side, we have the rationality of good public administration that sees no distinction between the defense industry and other industrial sectors in the production of wealth and social well-being. By this logical, the defense technological-industrial complex of a country, submitted to market forces, should autonomously construct its own mechanisms of economic self-sustenance and competivity. 

India is developing a robust modernization program of its military means at a projected cost of US$ 64 billion, undertaking a trajectory with four mutually complementary threads.  

First thread

This thread contemplates the manufacturing of platforms and arms vectors with a degree of sophistication and efficiency limited by the forms and functions demonstrated in already tested and operational models. The projects in that thread basically obey the logic of self-sufficiency, concentrating capacities in the industrial units of the armed forces and specific private companies (shipyards, for example) with a great impact on local economies, bearing in mind the scale of the demands for labor, generating important social benefits.  

For the development of this thread, India has more than 50 laboratories and centers of defense research. Recently, the Parliament recommended that at least 15% of the defense budget should be allocated to research and development, aiming at reaching a 70:30 ratio between goods produced internally and those imported, within a 10-year plan, to reach a condition of self-sustenance of the defense industry. However, the results have not yet materialized, mainly because of the misalignments between the priorities of defense policy and the priorities of science and technology.  

Second thread

This thread is focused on the industrialization of items of preventative and corrective maintenance of items destined for recompleting of operational consumption, which employs the technologies already demonstrated for its manufacture and which can be constructed at a low cost of adaptation of production systems already installed. The projects of this thread obey market logic, even critical items like munitions and missiles. 

Regulation and strategic stocks in this case, compensate the vulnerability of non-self sufficiency. Although the capital immobilized is large, the system of public finance relieves the armed forces of the resulting accounting costs.   

Third thread

In this thread, India considers the construction under license of all the systems that the armed forces need and have access to via the market, included in this category, from subsystems and communication equipment and electronic war and embarked software, up to large arms systems like the Vijayanta tank and MIG planes. The projects of this thread, in their majority, are public undertakings, with an integrating state company and technology transfer for national companies subcontracted for the industrialization of subsystems by way of offset mechanisms.

Despite these mechanisms, licensing does not appear to have effectively contributed to the development of the national Arjun tank and national fighter planes, apart from not having helped reduce foreign dependence on maintenance of foreign equipment operated by the Indian armed forces. This situation seems to flow from the limited production scale of the equipment manufactured under license, which would not justify the implantation of manufacturing units in India, ending up generating, at the most, dedicated production or assembly lines in the productive installations of the selling countries, with almost no technology transfer. 

Or rather, “licensing” goes on to be more the business strategy than the mechanism of the substitution of imports by the development of autonomous technology, mainly when the scale of production is low and the level of capacity of the system to be produced is very sophisticated/high. 

Fourth thread

In this thread, India establishes the direct import of systems that cannot be included in the three previous threads, such as systems that integrate capacities of dynamic detecting processing, identification and evaluation of data with attack vectors. That option has been the object of much criticism since it involves the abandonment of the logic of self-sufficiency that marked the first years of the construction of an autonomous Indian defense industry, soon after its independence. In order to reinforce the criticisms, accumulated data seem to point out that, contrary to expectations, the acquisition of arms of a new generation from a same manufacturer as the existing ones, or a perfecting of existing arms from the same supplier, does not reduce the acquisition cost, because the new systems or modernized systems involve the integration of various systems from other companies, which had not collaborated in the manufacturing of the original model. 

Although there is no substantive and dedicated research to this area, the four threads practiced in India do not resemble much what seems to be the Brazilian reality. Under this premise, the transitivity of the conclusion is that only a strong policy of research and development, with the placing of orders in the national market, seems to generate some satisfactory result and gain relevance and pertinence in the face of the news of the France-Brazil strategic partnership for the construction of submarines. We may be more sustaining the continuity of the French bellicose industry, which has difficulties, than acquiring the autonomous capacity for the Brazilian defense industry. We may be shooting ourselves in the foot!