The Central government has announced increase in foreign direct investment (FDI) in the defence sector from 26% to 49%. It has done away with the requirement of licences for defence manufacturing for all but 16 items. It has called for turning India into an arms exporter in the world arms market. The big capitalists of India are gleefully eying the prospects of making maximum profits by increasing investments in this sector, through collaboration with foreign companies.
Tata Group of companies
14 Tata companies are engaged in the Indian defence sector. These include TAL Manufacturing Solutions, Tata Advanced Systems, TCS, Tata Elxsi, Tata Industrial Services, Tata Motors, Tata Power (SED) and Titan Company.
At present, the Tata group of companies are involved in integrating and supplying systems of strategic importance in the areas of mobility solutions, aerospace, missiles, radars, network-centric warfare enablers, electronic warfare systems, manned and unmanned platforms (land, aerial, marine and submarine), integration of C4I (command, control, communications, computers and intelligence), command and control systems for air defence and naval combat, battlefield transparency systems, information assurance and home land security systems.
TASL exports between Rs. 2 billion and Rs. 3 billion worth of military systems per year. It has signed contracts for the supply of systems for the medium-range, surface-to-air missiles being developed jointly by India and Israel.Tata Motors has been exporting Rs. 1 billion worth of military vehicles annually for the past three years. Tata Power SED has developed the Pinaka launcher for Akash missiles and also undertaken modernisation of airfield infrastructure.
The defence equipment industry in India was opened up to 26 % FDI in 2001. According to the Department of Industrial Policy and Promotion (DIPP), only about $4.94 million of FDI has come into the defence sector in the last 14 years. At present, the bulk of the domestic defence production is through the Ordinance Factories or the defence PSUs. However, India imports over 70 per cent of its defence requirements from abroad. In the decade 2001-2010, the Indian state started increasingly looking beyond its traditional defence supplier Russia, towards France, Israel, UK and US. India is one of the largest defence importers in the world with a very small component of exports and ranks among the top ten countries in terms of military expenditure.
However, since 2001, Indian private sector companies have been steadily making inroads in the defence equipment market - both globally and locally. Several Indian and foreign monopoly capitalists are already involved in production and supply of goods and equipment to the defence sector in our country and many others are seeking to enter into this lucrative sector.
The Tatas, Reliance, Mahindras, and L&T are some of the major private monopolies already into the defence sector. Indian public and private sector companies are already having collaboration with companies from Israel, Russia, etc., in this sector. The case of the Tatas is illustrative. (see box) The NDA government is seeking to extend this incipient course.
Indian private companies growing in defence equipment market
In 2011, Tata Power Strategic Engineering Division (SED) - an unlisted Tata group company - won a $186 million (Rs 950 crore) contract from the Indian Army to manufacture two electronic warfare systems to be deployed in mountainous regions. It had also won a $260 million (around Rs 1,170 crore) contract to modernise 30 Indian Air Force bases.
Some of the major companies in the military sector are L&T EADS, Quest and Bharat Forge, besides Centum and Tata Power SED. Several smaller companies - such as Dynamatic Technologies, Avasarala Technologies, DefSys, Ravilla and Taneja Aerospace - have in the past three years acquired advanced technological capabilities. These companies are close to creating whole systems, as opposed to parts.
Indian private companies and the global defence market
Globally too, a huge market exists for Indian private companies, estimated at $7 billion to $8 billion. In 2011 Indian private companies exported defence equipment worth $2 billion, whereas in 2007 this was around $73 million. Availability of cheap labour is one of the factors these companies use to their advantage, besides their increasing technological capabilities.
In 2012, Centum Group, a Bangalore-based provider of aerospace and defence electronics, broke into the select group of contractors supplying to US-based defence solutions provider Thales. It can now supply directly to any of the 70-plus sub-groups that make up Thales's diversified business, from military communications in combat management systems for ships to integrated air defence systems for the US military.
According to a report released by Edelweiss Securities Ltd. on 18 July, Indian big monopolies such as Tata group, Reliance Industries Ltd (RIL), Larsen and Toubro Ltd (L&T), and Mahindra Group are increasingly forging partnerships with global defence companies.
Economy driven by militarization
The US, UK and France are some of the major imperialist powers whose economies are driven by militarization. The role of the military industrial complex in the US is well known and documented. The biggest monopolies in the military sector are guaranteed maximum profits by the governments which buy the arms and equipment from these companies. Arms sales worldwide to different countries, the fomenting of wars, so that arms are consumed and new and even more deadly weapons of destruction are produced-- such is the course that US imperialism and other imperialist powers have been pursuing.
The Central government wants India to pursue this course. This is a course that will no doubt ensure profits to the monopolies that are in the defence production sector, as well as their foreign collaborators. But it is a course that will not only further impoverish the people of our country, it will lead to more reactionary wars in the region and worldwide, as the bourgeoisie will make direct profits from wars.
India’s likely defence expenditure is estimated at $248 billion over the next 10 years. The minimum estimated opportunity for Indian private companies in the defence sector is $75 billion, given the 30% offset condition, according to the Edelweiss report. (India’s defence offset policy mandates that foreign contractors source components and systems from local vendors for at least 30% of the value of orders worth more than Rs.300 crore that they get from India).
The government has cleared procurement proposals worth over Rs.21,000 crore and also approved a project for the production of transport aircraft, which is open only to Indian private sector companies. Among the major proposals to receive approval is a Rs.9,000 crore tender to provide five fleet support ships for the Indian Navy, for which the request for proposal would be issued to all public and private sector shipyards.
India's total defence imports were a mammoth Rs 40,000 crore in 2013 and it is a big domestic market for private companies to tap into. Between 2004 and 2013, the government issued 209 licences to Indian companies to manufacture defence equipment domestically. The rate of granting licences has increased over the last five years.
As is obvious from the above, the bourgeoisie is rapidly striving to build up a huge military industrial complex, which will be the driving force of the economy in the coming years. This is in keeping with the striving of the Indian bourgeoisie to become a major imperialist power with its own sphere of influence.
Increasing investment in the defence sector is one of the ways adopted by bourgeois states to come out of the economic crisis, by showing figures of higher growth rate. It is justified by the governments in power, under the slogan of ‘national interest’. However, this is an unproductive, parasitic sector, which does not lead to any improvement in the well being or living standards of the people. On the contrary, the wealth produced by the labour of our people as well as our invaluable natural resources are being channeled into this sector which does not produce anything for society but only enhances the coffers of the biggest monopoly capitalists. The manufacturing industry and other industrial capabilities of our society will be more and more geared towards producing for the war machinery, rather than towards fulfilling the growing needs of our people.
Further, it fosters war which will destroy the productive forces of the society and turn our people into cannon fodder, in s ervice of the imperialist ambitions of our rulers. With the economy being increasingly driven by militarization, the danger of war will greatly increase.
The defence sector in India is a sector in which investments are a source of enormous profits. With the present thrust towards militarization, this sector promises a most lucrative market. That is why Indian private companies are so eager to get into this sector and are vying with each other and other global players, for contracts.
Enhancing defence production technology will also enable the Indian bourgeoisie to emerge as a major exporter of defence goods and a major imperialist power in the world, which can flex its military might, especially against countries in which the strategic interests of the Indian bourgeoisie are involved. It has nothing to do with ‘national security’. The Indian armed forces are, at present, used mainly to maintain a state of tension and hostility with our neighbouring countries in order to enable the Indian state to dominate and interfere in their internal affairs, as well as to terrorise the Indian people into accepting the agenda of the big monopoly bourgeoisie.
Dangerous course of military alliances with the imperialists
The military industrial complex in the imperialist countries is a driver of the foreign policy of these countries. This can be seen in the fact that whenever the leaders of the US, UK, France and such other countries meet Indian government leaders, a major item on top of their agendas is the sale of weapons of destruction. Why will these companies share advanced technology for production for war with India, unless the Indian government comes into a strategic alliance with such powers? In other words, Indian capitalists in the defence production sector, and their strategic partners from abroad are going to push for India to dovetail its foreign policy with such powers. This is a course that will lead our country into imperialist alliances directed against other powers, and against the sovereignty of other peoples and countries.
The working class and people of our country have to demand an immediate halt to this growing militarization, this massive drain on our productive forces and resources, when the most basic needs of our people – food, shelter, education, health, sanitation, transport, etc. – remain unfulfilled. We must refuse to become cannon fodder for the imperialist striving of the Indian bourgeoisie.