Defence industry reform in China-India: the difference is not about the “market”

This was published by the National University of Singapore (NUS) in their online journal as a contributing column...

http://lkyspp.nus.edu.sg/cag/publication/china-india-brief/china-india-brief-39

The divergent degrees of accomplishments achieved by the Chinese and Indian Military Industrial Complexes (MICs) is indeed a (yet another!) area of China India comparative studies. This is especially true as both nations have embarked on ambitious transformations of their security architectures.

Richard Bitzinger’s note on the topic published recently is therefore a worthy objective. Unfortunately the conclusions drawn in the note almost completely miss the point.

First the good news. The hypothesis itself is unexceptionable. The Chinese domestic Military Industrial Complex (MIC) has been rather more successful than its Indian counterpart, with a record of operational successes spanning a truly wide array of land, air and sea platforms. The Indian MIC’s record outside of naval ship design and strategic missiles has been extremely variable.

However, that is where the good story ends, and a series of questionable facts and assumptions are used to explain the hypothesis.

To dive straight to the heart of the problem, the biggest issue with the analysis (and therefore the conclusion) is in identifying “statism” and monopoly of Defence Public Sector Undertakings (DPSUs, as they are known in India) as the key reason for the underperformance of the Indian MIC. In comparison, the Chinese MIC’s successes are attributed to “market oriented changes”.

Facts though state a very different story. Far from being “statist”, the Indian defence market has been remarkably “free trade friendly” in its orientation. The government has allowed every global firm willing to sell weapons in India a near equal access to the market, with no positive discrimination in favour of an Indian product. The result has been obvious. For platform after platform, the Indian military has chosen a proven, state-of-the-art, reliable system from a foreign OEM rather than trying out an Indian product that is incipient in its development, less advanced in its features and with potential Quality Control issues.

The example of the HF-24 Marut quoted by Dr Bitzinger is quite illuminating in this regard. It was India’s first attempt at combat aircraft design and manufacture. While it had its issues, most notably an underpowered Orpheus engine, it was also a rugged design (the design team was led by the legendary German aircraft designer, Kurt Tank) that could take considerable battle damage and still survive. When it came to graduating to the next generation of ground attack aircraft though, the Indian Air Force and the government chose to go with a more advanced and proven Anglo-French Sepecat Jaguar rather than invest in an upgrade of the HF-24. It was a full generation later that India started on its next aircraft project (the LCA), by which time all the experience of the HF-24 was lost.

The aircraft instance is actually a conspicuous illustration of the issue. The same story repeats itself across multiple weapon systems – Main Battle Tanks, tactical munitions, trainer aircraft etc. Basically, the Indian defence industry adopted WTO trading principles long before even the Uruguay Round of GATT was initiated!

The contrast with the Chinese MIC couldn’t have been starker. Due to political issues, China’s access to US and European OEMs for military equipment has been sanctioned out of access for most parts. Russia has been a regular supplier, but even there political tensions with Russia has been a constraining feature of the relationship throughout the post WWII history. As a result, the Chinese military has had no option but to depend on domestic manufacture to sustain its force posture. Stretching the aircraft example, the first Chinese attempt at combat aircraft manufacture was the Chengdu J-7, a reverse engineered version of the iconic Russian Mig 21. That effort was quickly followed by multiple generations of iterations (the J-8 series) and today the Chinese MIC is trying to develop stealth aircraft.

In other words, access to global producers, and the willingness of the government to buy, in other words being “market friendly”, ensured that the user (the Indian military) chose the “best” option available, invariably a Russian/European/(of late) American platform. This acted as a deterrent towards development of an Indian MIC. On the other hand, the dire necessity of depending on a domestic MIC has ensured that the user, ie, the Chinese military has incubated decades of “sub standard” products and enabled the Chinese MIC to graduate to developing more cutting edge products today.

As with any hypothesis, a control group analysis is a key element of proving the same. In this case, India’s strategic missile programme is a telling story. Now, ballistic missiles are one area where typically global markets are not available to any country. There are strong international prohibitory treaties like MTCR, which forces most countries to develop its own platforms. India wasn’t an exception, especially after international sanctions on WMD-related technologies post the nuclear test in 1974. And this has been one area where the domestic programme has been a spectacular success, with succeeding generations of ballistic missiles with ever increasing range (from 150 Km Prithvi to 5000 km Agni V), sophistication (from strap-on gyros to MINGS/MEMS-based navigation) and ruggedness (from liquid-fuelled Prithvis to containarised solid-fuelled Agni V). As the user (the Indian Army) did not have a “market” alternative available, it had to make do with basic versions first, and then graduate to more advanced levels s the programmes matured.

The lessons to be drawn therefore are complex. In essence, it involves a change in higher defence management. But it also importantly involves a change in the mindset of the customer, the Indian military, that needs to move on from playing the role of a detached customer to one of a partner looking to incubate domestic industry.