India's defense buying spree

It should not deter us that Wikileaks has failed so far to enliven Delhi’s parlour debate on what America makes of India’s military heft (or lack thereof). Apart from a stray mention of the lethargy with which India arms itself, there is nothing in the latest leaks to talk about. What should excite interest, however, are the hard facts that are India’s own—specifically, the $50 billion that New Delhi has lined up for defence purchases over this decade. It is a staggering sum of money, and could conceivably give Indian defence forces a bigger bang for the buck than it has obtained of late.

THE ORDER ROLL
So, what is on the shopping list? The big ticket items include spending Rs 42,000 crore on 124 next-generation fighter aircraft for the Indian Air Force, Rs 20,000 crore on six Scorpene submarines, and an additional Rs 12,000 crore on three submarines to be bought off the shelf and three more to be built in India. Plus, Rs 5,000 crore for 300 odd attack helicopters for the Air Force and Army, Rs 4,800 crore for C-130 airlift aircraft and Rs 8,000 crore for 10 strategic heavy lift aircraft. There are howitzers and the like as well.

Deployed well, all this firepower could reshape the way India defends itself in the foreseeable future. “The new hardware being acquired is partly because India has now more money to do so and partly because the mandate of its armed forces is being transformed,” according to Sunil Dasgupta, non-resident fellow at Brookings Institution, a US think-tank, and co-author of Arming Without Aiming, a new book on India’s arms acquisition strategy, “India’s hardware acquisition will have to come from a proper identification of threats, and then [India must adapt] the weapons to changes in threat perception.”

Changes, of course, are ongoing. In fact, there are four main trends that are shaping India’s armoury.

HIMALAYAN THREATS
The Indian defence budget has long been dominated by the Army. However, over the next decade the Air Force will emerge as a key strategic force. This is a critical change. The manpower-heavy Army can prove pivotal on the ground, but a nuclear strike capability involves air delivery—with back-up aircraft. This explains the 124 new fighter aircraft and opening of half a dozen air bases along the Himalayas, from Arunachal to Ladakh. The Air Force has already deployed new Su-30MKI aircraft in the western theatre, but more firepower is needed.

The long Chinese border is expected to come increasingly into focus. On the ground, the Army is raising two new mountain divisions and a mountain brigade. That’s 40,000 extra soldiers. It is partly to assist this force that the new C-130s and C-17 heavy lift aircraft will be employed. Ultra-light FH-177 howitzers will also be for high-altitude use.

THE SHIFT TO AMERICAN ARMS
From artillery-locating radars and long-range P8I spy aircraft for the Navy, to the 124 new fighters and heavy-lift planes, suddenly the US looms large on India’s purchase list (though there are five other suppliers vying for the fighter deal). This is a clear break from the past, when Russia accounted for at least 70 per cent of India’s hardware supplies. American equipment is costlier upfront even if it takes less money to maintain, but India has weightier issues to ponder right now.

The US, for a start, is not making it easy for India with its insistence on intrusive inspection regimes and zest for live-wire information synchrony. Even US President Obama’s recent visit could not overcome this hurdle. India is resisting two arrangements proposed by the US. The first of these is the Communications Interoperability and Security Memorandum of Agreement (CISMOA); and the second is the Basic Exchange and Cooperation Agreement (BECA) for geo-spatial cooperation. These are sticking points, as they effectively force India and the US into a closer alliance.

“The US has a reliability problem in India. The perception is that the US could be difficult in the long run where supply of weapons is concerned,” as Dasgupta sums up, “On the other hand, India wants a strategic relationship with the US that emphasises common values. The defence deals will be an important component of such an overall relationship.”

THE OFFSET CLAUSE
India’s new defence purchase policy, due in early 2011, is expected to formalise the so-called defence offset clause in arms purchase deals. Designed to nurture a domestic arms industry, it stipulates that contracts worth at least 30 per cent of any deal’s value be awarded back to Indian suppliers of parts, software and so on. The Tata Group already has some joint ventures with foreign firms to develop relevant equipment, and the Mahindra Group is in the field as well.

According to a report by Research and Markets, a consultancy, the offset clause opens up a market worth more than $14 billion over the next decade. Software supplies alone could yield about $2 billion a year in export earnings for Indian companies straightaway.

“The offset clause will allow Indian firms, especially in the private sector, to play a bigger role in the defence business,” says Anit Mukherjee of Institute for Defence Studies and Analyses (IDSA), an Indian think-tank, “However, for an indigenous capability in arms, the real way forward is to make the public sector more competitive and accountable, without which we will remain an arms importer for a long time to come.”

JOINT DEVELOPMENT
Increasingly, international partnerships will play a role in the way India arms itself. On the joint development of weapon systems, India is well on its way with three mega projects. The first aims to develop a fifth-generation fighter bomber jointly with Russia (a test flight was conducted in January 2010), which is expected to signal a leap in technical sophistication. The second is BrahMos, a supersonic cruise missile developed by DRDO jointly with Russia. The third is an effort with Israel to develop next-generation anti-aircraft missiles.

SELF-SUFFICIENCY
Foreign purchases often have their own problems. Remember the celebration two years ago that greeted the Navy’s acquisition of an amphibious troop carrier, USS Trenton, from the US? The rickety old ship (first commissioned in 1970) was touted as the Navy’s second-largest vessel, renamed INS Jalashwa. But just a few months into its deployment, it sprouted a hydrogen sulphide gas leak during an exercise in the Bay of Bengal, killing five sailors on the spot.
Money, evidently, is not all one needs to transform a military force. One needs a coherent strategy to make the most of the weapons at one’s disposal. The induction of foreign military hardware, for example, requires a proper timeframe within which integration must take place—with enough to fill the gaps in the interim. And this has to be done within the context of a clear purpose in the form of a military doctrine, which places each weapon system in one or many simulated theatres of war, as it were, in relation to specific threats.

On all these counts, India appears to be falling short. “The higher defence organisational set-up in India continues to exhibit serious weaknesses in its ability to prosecute wars in the contemporary strategic context,” says Harsh V Pant of the Centre for War Studies at London’s King’s College. In other words, even as India faces stiffer threats than ever before, its defence readiness has seen a dramatic decline. “Doctrinal evolution in my opinion is more important,” notes Pant, “India’s ‘Cold Start’ doctrine is an attempt to fight limited wars, under the nuclear shadow, with two enemies at the same time. The political establishment remains coy about accepting it, even starting a debate on it. But without some kind of doctrinal evolution, India, for all its acquisitions, will remain a second-rate military power.”

All the action, for now, seems to be focused on extra metal. “There is a whole range of requirements that are needed to augment India’s defence preparedness on an immediate basis,” says a senior Defence Ministry official, “The Air Force has a sanctioned strength of 39 squadrons, but currently has only 33, nearly half of which are antiquated MiG-21s and MiG-27s. The Army has not added a single howitzer gun since 1986, when Bofors guns were purchased, and needs 1,400 such pieces. The Navy’s submarine fleet has been reduced to only half a dozen subs that can be in service at any time. There are also big gaps in radars, small arms and attack helicopters, as well as heavy lift capabilities.”

Be it ammunition or aircraft, submarines or helicopters, field guns or hand guns, the message from New Delhi to the world is clear: India has no technology of its own to make such weapons. Bluntly speaking, this is a severe indictment of the Defence Research and Development Organisation (DRDO), which can count being taken off a US blacklist as its biggest solo achievement, edging out Leh Berry, a high-altitude fruit pulp that it has to show for its multi-crore R&D efforts, something that has not exactly sent shivers down enemy spines.

The reason that DRDO has been a washout is a peculiar conflict-of-interest it has been saddled with. The boss of DRDO is also the chief scientific advisor to the Prime Minister—not only is he in charge of developing weapons, he also has the job of evaluating the same. In any other country, this would be a scandal. But in India, it is a budget booster for an overseas shopping spree.

The country’s sudden rush to acquire expensive weapons has another reason: making up for lost time. Under Defence Minister AK Antony’s watch, a kind of procurement paralysis had set in, with defence insiders joking that the Centre’s grand defence strategy was to defend his hard-won reputation for integrity. In the interests of transparency in defence deals, he banned middlemen.

Then reality struck; defence deals globally almost always involve intermediaries. So the Defence Minister did the next best thing. If he could not control graft, he could ensure there was no space for it—easily done by okaying no decision on any defence deal.

Another delay factor, some surmise, has been on account of the Indian Government’s new offset policy, which has been many years in the making; in this view, local companies needed time to get their act together.

And time has been running out. India’s 2010-11 defence budget is $31 billion. Even after accounting for routine expenses (salaries and so forth), there is plenty for capital expenditure on arms. Yet, so far, the latter part has gone unspent. This is how it has been for several years. Between 2000 and 2007, for example, an estimate says that the Ministry of Defence returned about $5 billion of unspent funds to the exchequer. Of any other ministry, such thrift would be admirable. But the world is a tough place, and the threats that India faces do not make any allowances for military modesty.

No wonder India is suddenly set to become the world’s biggest importer of arms, as noted by Sipri, the Stockholm-based research institute that tracks arms sales. India imports a huge 70 per cent of its weapons. It’s possible to justify this in terms of trade theory: export what you’re good at, import what they’re good at. But in the world of geopolitics, that’s a naïve way to analyse the scenario. Defence dependency, in fact, is the measure to watch. And had it not been for India’s nuclear cover, India’s overall dependency would have risen sharply. In terms of conventional warfare (under the ‘Cold Start’ doctrine), it certainly has.

Indigenous R&D could change that. Once private ventures acquire technical expertise, expect a series of new breakthroughs. Co-development beats off-the-shelf purchases. One gains not just defence independence, but also a set of patents and spin-offs that can be useful in other sectors such as software (the US experience validates this point). In the end, that is what counts, not the billions lined up to buy weapons.

Ak47- the king and I

A chill ran down my spine, and it wasn’t just the biting cold of the mountain desert at Kumbitam, Ladakh. I was frightened and thrilled at the same time. You would be too, if you held death itself in your hands. I was about to fire another burst of rounds from the greatest piece of machinery ever invented by man in my opinion. The AK-47.

I follow instructions, load the cartridge of 30 bullets, take aim, unlock the safety catch, and fire. All this in less than 15 seconds. I was aware of the infinite lightness of this beast—whose burden is to kill. For a gun that can fire 600 rounds of 5.44 mm chambered steel-cased ammunition per minute, it weighs only a little more than 4 kg, about as much as a child’s school bag.

There is something strangely uplifting about this weapon. One feels free, liberated by the rawness of its touch and reassurance of its reputation. As I continue firing some of the 150 odd rounds I fired that day at the 8th Mountain Division of the Indian Army, the bullets whizz away at the rate of 780 metres per second, which is the AK-47’s average muzzle velocity.

Down the decades, its trademark rat-a-tat-a-tat sound has reverberated through thousands of conflict zones across the world. From the killing fields of Vietnam to the icy heights of Kargil, from the gang wars of Mexico to the death zones of Iraq and Afghanistan, on to the bad streets as darkness falls over Johannesburg. That rattle brings with it death or a terrible wound—it can also be a harbinger of victory.

In the high mountainous corners of desolate Ladakh, this gun generates a sort of resonance that cannot be described, only dreaded.

The AK-47 is at once a forbidding firearm and a piece of art. One instant the peacekeeper, the very next the instrument of terrorists’ carnage. At once, friend and foe. A darling of special forces of the State and beloved by revolutionaries from Mozambique to the Hezbollah (both have it on their flags) keen on its overthrow. This is a gun with multiple personalities enough to fill an entire psychiatric ward.

Make no mistake, the Avotomat Kalashnikova 47 is the world’s greatest assault weapon. It was conceived in 1942 in the midst of World War II. German forces were running the Soviet Union over, 1,500 miles had been conquered by the Wehrmacht, 7 million Soviet citizens lay dead. The assault rifle was already a German invention, splattering blood relentlessly on the Steppes. It was then, during the savage siege of Stalingrad that would eventually destroy the German 6th Army and with it Hitler’s ambition, and cost at least 350,000 Soviet and 400,000 German lives, that work began on the rifle that was to attain iconic status.

Mikhail Kalashnikov, the man who designed this magnificent firearm, was hurt in battle and was recouping in hospital; born in 1919, the year of Amritsar’s Jalianwalla Bagh massacre (thankfully, the gun came many years after Dyer), Mikhail was one of 18 children his mum bore. In this hospital, as he later recounted in interviews, he was encouraged by a fellow wounded soldier to develop an automatic rifle to rival what German soldiers had.

Kalashnikov, being a perfectionist, developed one better. He put brains and skills together and came up with the gun that even today, some 60 or more years on, remains the weapon of choice the world over. So successful has it been that more than 90 million pieces of this gun have been manufactured, since. The AK-47 has been used in at least 120 countries worldwide.

What is even more amazing is that in the technologically fast changing world of firepower, over half a century of the AK-47 has seen only two modifications, and that too, so minor you wouldn’t even notice. The first was when Chinese designers developed the AK-56 (in 1956), which differs slightly in its fully hooded sights in contrast with the original AK-47’s partially enclosed one. Some even consider this copycat version poorer since it lacks a threaded muzzle that gives the AK-47 its trademark soft recoil.

The other attempt at upgradation was by Soviet engineers, who developed the AK-74 (in 1974). Again, this had new bullets, but while more accurate, their killing capacity couldn’t match that of the old bullets. The original old killers have a way of producing what science terms ‘hydrostatic shock’. Once on target, each bullet pierces its way in and fragments into body tissue, making it almost impossible to treat. The new guns create much cleaner wounds.

What is more, given that the AK-47 gun can shoot 600 rounds a minute, it has turned target accuracy a mere matter of academic interest rather than operational performance.

Mikhail Kalashnikov is still alive. He has only two regrets. One, that the gun, though perfect, took so long to develop. It entered service with the Red Army only after the end of the War—in 1947. By then, the Soviet Union had made a dead mouse of the Nazi Hitler in his bunker, and an iron curtain was being drawn across Europe. The gun’s debut, thus, was in the clasp of an iron fist.

The Soviet Union lost nearly 20 million to the War which killed 5 million Germans. Had the gun come earlier, Soviet Russia could have suffered far fewer casualties, and perhaps even have ended hostilities sooner. This remains one of the intriguing what-ifs of world history.

Kalashnikov’s second regret is the sheer number of people his gun has killed and wounded. In an act of supreme irony, the man who designed this gun has now set up a fund for gunshot victims.

On that cold day, as we finished our test-firing of the AK-47 in Ladakh, I felt a strange numbness which overcame the uplifting sensation of freedom or even exhilaration that I had experienced just a moment earlier.

Next to me, firing away was a fellow journalist, Muzzamil Butt, working for Sahara, a TV channel. Later at the mess, as we finished our third round of Old Monk, both drinking at a slightly faster pace than we were accustomed to, I asked him how he felt. His answer was startling: “I have overcome fear. It’s the end of my nightmares—this gun began it, and now after firing it, has set me free.” Muzzamil had once been shot covering a protest in Srinagar; the bullet had come through the barrel of an AK-47. He has lived to tell and win his personal battle.

how the cell phone kills other brands

A RECENT Hindi film made by Shyam Benegal, Welcome to Sajjanpur, has an interesting moment. A villager bypasses the post office and sends an SMS instead to his relative. Scenes like this hearten urban moviegoers who’re keen to see technology work its merry miracles with the masses. But they also worry rural retailers and marketers who fear that the day may not be far that they too are bypassed— ‘disintermediated’ in jargon—as the humble ringtone turns into a giant sucking sound across the vast hinterland of India.

As the cellphone assumes the status of the individual’s most prized possession, phone bills are sucking away so much money that there’s little left for other things. Almost nobody can escape. The first and hardest hit are marketers directly in the way of the mobile revolution. If you are selling products such as watches, radio sets or even cycles in rural India, you are up against a force you have no time left to ignore any longer.

Rama Bijapurkar, marketing consultant, has witnessed this first-hand in her travels across India’s hinterland. “There is a definite category collision brought on by the sale of cellular devices,” she says, “especially in rural India. In some categories, this collision could be as deadly as the asteroid that wiped out the dinosaurs. It is distinctly possible that entry-level products such as radios and watches become history within a very short time in rural India.”

THWACKED BY THE HANDSET
According to data available with NCAER, a statistical research organisation, half of all radios, watches and cycles sold in India are in the rural market. The cellphone looms large now as a rival for the interest of these products’ buyers. It has become the first consumer durable that a person buys, which means that other big-ticket purchases are put off till later. Increasingly, a ‘later’ that never comes. In the case of watches and radios, the phone acts as a substitute—and so far as cycles are used to reach someone, indirectly for these too. “Cellphone expense cuts down on rural commuting significantly,” observes a microfinance professional with experience in rural Uttar Pradesh. Since plenty of commercial activity in rural India centres round agriculture and trade, the phone keeps the need for physical travel to a minimum. So it’s not just cycles, even motorcycles and related products have been affected.

A recent study by Virgin Mobile, a telecom operator, estimated that a growth rate of over 30 per cent a year is feasible for cellular phone sales in rural India. Philips, which has been rural India’s top marketer of radio sets for decades together, refused to comment when contacted for this story. The silence, presumably, is not without reason.

That some products are bought at the cost of others is well understood in low-budget markets. “The rural customer is unique in the sense of price sensitivity,” says B Narayanaswamy, president, Ipsos Indica Research, a consultancy that has done extensive work in Indian villages, “For him, the mobile phone provides a multiple product platform. Thus anything in the price ballpark, from watches to radios to torches, has already seen sales dip.”

The availability of cheap loans for cellphones also lowers the entry barrier. “A lot of microfinance lending is done to enable communication and trade, and is targeted at purchasing a cellphone,” says the microfinance professional. In any case, logic dictates that lenders should be happier lending money for a product that’s relatively easy to trace, at the press of a few buttons.

This is bad news for other products.

Cellphone penetration, meanwhile, deepens by the day. “We are very bullish on rural India,” exults Vipul Sabharwal, director, sales, Nokia, “Today Nokia has over 15 entry devices that range from Rs 1,300 to Rs 5,000. The village market demands three features: the phone has to be affordable, durable and practical. The Nokia 1202 is our lowest cost mobile device, designed specifically for people in rural areas. It features a flashlight, extended battery life, loud ringtones and a phone book. The Nokia 1650, priced at Rs 1,700 is Nokia’s lowest cost colour phone, and it includes an FM radio. And yes, the multi-functionality pull does make it attractive, and crowds out the need for the consumer to purchase the same functionality separately.”

All this, even before secondary effects start kicking in. Once phone subscribers start using their handsets to buy music, audio-visual clips and perhaps even groceries someday, dozens of other marketers will be sweating. Do they have any hope for respite?

RING FENCING
Rural marketers are faced with a cellular challenge. What should they do by way of response? “Provide value,” advises Jagdeep Kapoor of Samsika, a marketing consultancy, “Less is definitely not more in rural India.”

Some products need not become obsolete. “Torches, for instance, can survive,” he adds, “A phone battery is no match for a torch, but they have to give value. Electricity outages are real in these parts. More power at lower price points with emphasis on design will help.”

Watches, on the other hand, may need to take a leaf out of Titan’s marketing book. In urban India, the brand went beyond functionality to sell watches as fashion accessories instead of timekeeping devices. “For watches, they have to move up to a gift category—say, as wedding gifts. Just a cheaper priced watch is not the answer,” says Kapoor, “It’s not going to be easy for these brands to restructure their marketing strategy, but if you make the consumer move beyond the entry level, there is certainly scope.” Rural incomes are rising, and anything worn on the body can act as a status symbol—also a reason that cellphones are often waved about in social settings.

Then, marketers need to do a better job of distribution. ‘Joh dikhta hai, woh bikta hai (what’s seen is what sells),’ as Kapoor’s maxim goes. This is something at which cellphone marketers beat them hands down. In rural Andhra Pradesh, for example, handsets sell right next to ration shops from which people buy their essentials. But as a study by research firm ORG has outlined, other durables suffer from low availability in rural India. Of course, fanning out isn’t cheap; the investment would need to be justified by higher sales prospects in the future. This, again, comes down to the challenge of generating rural demand in the face of the cellphone threat.

But then again, going back to Sajjanpur, gaining visibility can also be done via cinema exposure. If marketers can get filmmakers to weave interesting usages of their products into their film scripts, perhaps they’d have a better chance at prolonging their survival. Still, it’s hard not to pity the marketing executive in any of these hardhit categories, should he get that phone call informing him of his next posting—somewhere in the labyrinth of rural India. It promises to be the toughest marketing job in the world. Crack the problem, though, and it could bring you everlasting fame as part of a business case study.