In another wake-up call for the Indian security establishment, the latest list of the 25 largest arms companies in the world released by the Stockholm International Peace Research Institute features four Chinese state-owned entities. Of them, three figure in the top 10. This clearly highlights the rapid military modernisation taking place in China, as well as growing Chinese arms exports to countries like Pakistan, Bangladesh and Algeria.
In fact, China is now the world’s fifth-largest arms exporter behind the US, Russia, France and Germany. Contrast this with India’s unenviable position as the world’s second largest arms importer, despite being the third largest military spender.
This means we are in the vulnerable situation of being over reliant on defence imports when China – our main strategic rival today – has become a defence export powerhouse. At a time when India and China are engaged in a tense border standoff in eastern Ladakh, this disparity is untenable.
There are two parts to the problem. First, a very large portion of India’s military spend is on pensions. In fact, in the 2020-21 defence budget, the pension bill was almost $18 billion out of the total of $63 billion. And the day-to-day running costs and salaries of the Indian armed forces far outstrip the capital outlay for military modernisation.
To rectify this situation and free up resources for modernisation, armed forces personnel need to be streamlined to achieve a better teeth-to-tail ratio. Second, there needs to be clarity on indigenous defence production and transfer of technology. A recent CAG report noted that offset obligations of foreign vendors are hardly fulfilled with negligible high technology transfers taking place.
In other words, foreign vendors have been treating Indian defence contracts as easy cash cows with no real benefit accruing to India’s indigenous defence industry. Unless offset obligations are strictly enforced and indigenous production boosted, the gap with China will continue to widen.