defence

India’s Defence Production Optimisation Problem

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The Caravan has an excellent in-depth story on the Rafale controversy. Beyond the specifics of the current controversy, the investigation throws light on the problems in defence production that continue to haunt India’s strategic ambitions.

On the face of it, defence production suffers from an acute case of what I had referred to earlier as hyper multi-objective optimisation. My argument was that the reason some government policies in India fail is because they try to optimise several objectives simultaneously, ultimately creating a solution that meets none of the objectives.

Now defence procurement is essentially an oligopsony i.e. it is a market where only a few buyers exists — only a few nation-states in the world have the financial muscle to buy 10 submarines or 100 multirole aircraft for example. My argument is that this oligopsony makes the optimisation problem even worse. The government believes that because it has more weight in the market, it has the luxury of optimising many more objectives in the process.

Let us look at what the government is optimising when it sets out to purchase defence equipment today.

  1. defence preparedness: primarily determined by the end users i.e. the armed forces
  2. costs: both explicit and opportunity costs
  3. strategic value: every defence purchase from foreign players raises the question that should we buy from existing trade partners or not
  4. creating an indigenous defence-industrial complex: this is further divided into two sub-goals. One is sustaining the ailing government-owned public sector companies. The second one is spurring investment from private Indian entities.

Now, even without any prior background, optimising all these objectives appears to be a herculean task. But even while India’s procurement processes were notoriously lethargic, new objectives were being added. The fourth objective was explicitly added  through an offset policy in 2005 and more recently through a strategic partnership model in 2016. And quite naturally, it is this fourth objective that has become the main sticking point in the Rafale controversy.

So with the government’s flagship reform failing, we are back to the starting point: what should be the mechanism to address India’s defence requirements? What principles should govern procurement and purchase?

One of the ways to resolve hyper multi-objective dilemmas is withdrawal. The government could let go of the aim to indigenise when it is looking to make a specific defence purchase. Get rid of the offsets policy altogether for a few years. The indigenisation problem should then be targeted at a later point of time. This is just one method. There could be other variations of choosing objectives that can work better but what is clear is that the current method needs a complete and urgent shakeup.

 

 

Who’s More Powerful in Asia: US or China?

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The Lowy Institute’s new Asia Power Index makes for intriguing reading. For starters, it offers a good definition of power.

“Power is defined as the capacity of a state or territory to direct or influence the behaviour of other states, non-state actors, and the course of international events. It is the capacity to impose costs and confer benefits that shape the choices of others.”

The authors then assess the overall power of 25 key Asian states based on their weighted average across eight specific measures of power. These are:

  • Economic resources
  • Military capability
  • Resilience
  • Future trends
  • Diplomatic influence
  • Economic relationships
  • Defence networks
  • Cultural influence

The findings offer much food for thought. For instance, while the US and China are neck-and-neck on the measure of economic resources, there is a serious gulf between them with regard to military capability. Add to that the fact that while the US tops the defence networks measure, China ranks a low eighth. This is indicative that despite China’s rapid military upgradation and attempts at projection of might, Beijing is a long way off from catching up with Washington.

The two surprising areas where China trumps (pun intended) the US, however, are diplomatic influence and economic relationships. While the latter in Asia is understandable, one wonders whether the former is merely about Donald Trump’s America First approach or is a systemic change underway.

China also does rather well on the measure of resilience, which includes threats to internal stability, scoring 85.9 to the US’s 91.4. In the short-term, I’d agree with the authors on that. But I’d contend that Xi Jinping’s personalised control over the Party-state structure poses a serious threat to long-term stability.

India, meanwhile, ranks 4th in the overall assessment, just a shade behind Japan. And there’s some very good advice being offered for New Delhi to rise up the table, i.e. focus on converting its sizeable resources base into strategic gains and improving defence networks.