- The Rafale deal between India and France has been highly controversial, with the opposition Congress party accusing the government of corruption and favoring Anil Ambani's company. - The Indian defense sector has long been opaque and plagued by delays, cost overruns, and a lack of accountability. State-owned companies like HAL have failed to deliver advanced aircraft and other systems on time. - The NDA government argues it had to negotiate quickly to address declining capabilities of the Indian Air Force as negotiations on the Rafale deal had been dragging on for over a decade under the previous UPA government without result.

1. 4 Industrial economist NOVEMBER 2018
i n k l i n g s
Let bygones be bygones;
move ahead.
The ghost of Bofors is severely haunting the
Gandhi family. Even 30 years after Rajiv Gandhi
concluding this deal, the issue of bribes taken
has not died down. The Indian predeliction of
not to let bygones be bygones is so glaringly vis-
ible in every aspect of Indian polity.
With Modi winning the 2014 elections on the
issue of corruption, one finds a no-holds-barred
attack over the Rafale deal by those opposed to
the Modi government. There are no civilities.
Look at Rahul Gandhi instigating the employees
of Hindustan Aeronautics Ltd at Bengaluru: “a
very senior person in the government said that
HAL does not have the capacity. What about the
person who got the contract?” he questioned. He
also accused the government of ‘snatching’ the
Rafale offset contract from HAL and ‘gifting’ it to
Anil Ambani’s company.
The Defence sector has for long been consid-
ered a sacred cow. Its activities had been opaque.
Excepting the Parliamentary Committees, few
had access to Defence dealings and units. Most
Defence public sector undertakings had an un-
flattering record. Look at the main battle tank
project of Heavy Vehicles Factory taking decades
to deliver by which time battle tanks had lost
much of their relevance . We have a plethora of
defence research units. Little analysis is avail-
able on their effectiveness. Most of these are
doing university-type research, not entirely
related to costs and benefits or designing new on
many products for civilian use, characteristic of
NASA of USA.
Look at the largest of these, HAL. It had its
origins in the 1940s ahead of Independence.
HAL seems to believe in the inevitability of
gradualness. Its Tejas aircraft are no match to
contemporary fighter jets and these are also
much more expensive. There have been severe
delays in deliveries.
For eight long years A K Antony functioned as
the Minister of Defence in the UPA government.
He has earned a name as a ‘clean’ politician,
but sadly, he has also been known as one who
shunned taking decisions. Look at the pathetic
state of Defence preparedness. Rakesh Sood,
former Ambassador to France, points to the
vulnerability of Defence: “Indian Air Force’s
strength had reduced to around 32 squadrons
against the authorised level of 42. Instead of
fast-tracking the negotiations, A K Antony
was indecisive, prolonging the process.”
(The Hindu 16 Oct) Without timely action,
the strength is slated to fall further.
Negotiations for the Rafale deal began in
2000. After 11 long years, in 2011, Rafale
was selected and negotiations commenced
with Dassault in 2012. Nothing much hap-
pened over the next two years.
Understandably, concerned over the vul-
nerability of further drop in IAF’s squadron
strength, the NDA government had to come
out with a new-thrust in Defence policy act.
The fast-track negotiations with Russia,
France, Israel and the US point to the ap-
preciation of the urgent need to strengthen
defence capabilities.
Arun Jaitley pointed to the total value of
the Rafale deal of Rs 58,000 crore. Rs 29,000
crore will be supplied from India to Das-
sault by over 120 offset suppliers. Ambani’s
Reliance is just one of these that may ac-
count for supplies of around Rs 1000 crore.
Sounds sensible, but in the divisive Indian
polity who worries about the logic?
The Congress, with aspirations to return
to power, should endeavour to look at na-
tional interest and help build a measure of
consensus on major issues. Aadhaar, GST,
land acquisition and defence production
need to be approached from national inter-
est. The NDA should also endeavour to meet
halfway opposition leaders as Vajpayee did.
For long IE has been advocating a
strong focus on a barter system for bilateral
trade. In such high-value deals like Rafale,
India can build reciprocity, through agree-
ments to export vast quantities of consumer
products and household items that would
be needed in large volumes. Such contracts
can be concluded with US, Russia, France,
Britain, Germany, Japan, South Korea and
China. From these India has been import-
ing a lot of hi-tech, high value products. In
a barter system, there can be some give and
some take.