THE MADE IN INDIA DEFENCE
The ministry and the military admirably tackled the twin blows of Covid and China, with the last giving a fillip to self-reliance in defence
SSUMMER 2020. AS THE COUNTRY nervously regarded the steady ingress of the Covid-19 pandemic, the sudden Chinese aggression on the arid and cold high-altitude plateau of Ladakh dealt a twin blow to the Indian military. A different two-front threat confronted them: not Pakistan and China, for which they had been preparing, but Covid and China. At a time when the military had to chip in with logistics to fight the pandemic, the Chinese stealthily struck at the Line of Actual Control (LAC), inching forward on Indian held territory.
With a steady build-up of troops, armour and heavy equipment on the Chinese side, the Indian war machinery swung into action—jumbo C-17 transport aircraft of the Indian Air Force (IAF) made quick sorties to Ladakh from its base in Hindon near Delhi, air-dropping heavy military equipment, men and material, ensuring there was no shortage of supplies to troops in Ladakh, which over the next few months had swelled to over 50,000. Alongside helping safeguard the border, the aircraft flew around the globe, bringing in large oxygen tankers as thousands of people sick with Covid gasped for breath. Even Indian Navy ships were part of Covid relief operations, as the country faced its biggest military threat in years at the border with China.
For defence minister Rajnath Singh, the three forces and high-ranking officials of the defence ministry,
the twin challenge of an aggressive China and a raging pandemic was unprecedented. It could not have been war-gamed.
However, the brief clashes, the eyeball-to-eyeball confrontation and the near-stasis—despite 15 rounds of talks—ever since in Ladakh have given impetus to the push for self-reliance in defence along the lines of the government’s mantra of aatmanirbharta. Among various defence projects aimed at boosting domestic manufacturing, the indigenous aircraft carrier Vikrant is the prominent bigticket platform. The ship completed its maiden sea voyage in August 2021 and will be commissioned by August 15 this year.
The thrust on self-reliance has been complemented with decisions like the ministry of defence barring imports of 310 defence platforms and weapon systems, beginning from August 2020. In addition, the ministry’s ban on the import of 2,851 items that were being procured from abroad will save up to Rs 3,000 crore each year, according to its estimates. The purpose of the embargo on defence imports is, of course, aimed at strengthening domestic manufacturing. The new defence policy aims at Rs 35,000 crore defence exports in five years (2025) and doubling domestic procurement worth Rs 1.4 lakh crore of equipment.
With self-reliance being the refrain, the defence budget for 2022-23 has earmarked 25 per cent of research and development expenditure exclusively for Indian companies, start-ups and academia. However, the key strategic partnership model aimed at bolstering domestic manufacturing of defence equipment in joint ventures with foreign players faces hurdles. The projects under the model included helicopters, submarines, fighter aircraft and tanks, but negotiations over transfer of technology are dragging on for over five years since the plan was announced. ■
ECONOMISTS TALK OF THE NEED for the four engines of the economy—private investment, public expenditure, consumption and exports—to be firing at full throttle to trigger rapid economic growth. The Covid pandemic saw a major slowdown in three of India’s four growth engines— consumption, private investment and exports. Only one engine—the massive doses of public expenditure injected by the Modi government—pulled the Indian economy back from the brink. In FY22, something phenomenal happened in Indian exports, which contribute 15-20 per cent of the demand in the Indian economy. The country’s merchandise exports, which were stuck at an average of $300 billion for over a decade and had declined during the peak of the Covid wave to $291 billion, started surging rapidly. By March 2022, exports had registered a 43 per cent growth, with total merchandise exports crossing $400 billion for the first time ever. Even service sector exports boomed, with India touching $250 billion this year up from an average of $200 billion despite the tourism sector being in the doldrums. Commerce and industry minister Piyush Goyal attributed this big leap to “the whole of government and the whole of nation approach, with the Centre, state, local bodies, public sector undertakings and autonomous bodies working together to achieve this feat. It is a message to the rest of the world that the New India offers quality, reliability and scale.”
The remarkable turnaround was no accident but the result of a constellation of enabling factors. Among them was the Modi government’s decision to post the
dynamic B.V.R. Subrahmanyam, then the chief secretary of Jammu and Kashmir, as commerce secretary. Subrahmanyam had successfully executed the government’s decision to abrogate Article 370 and make J&K a Union Territory. Goyal entrusted him with the task to turn around India’s exports. After much discussion within the ministry and in consultation with exporters, Goyal and Subrahmanyam homed in on a target of $400 billion. The tech-savvy Goyal loves to create dashboards and track the progress of all major activities, something he did when he was the railways minister where he personally monitored train delays. Subrahmanyam broke up the targets and disaggregated them to regions and countries, products and commodity groups and export promotion councils. He then focused on both existing and new markets and products, including looking to regain lost market shares and sourcing from new areas.
Prime Minister Modi involved all the key stakeholders in August 2021, addressing some 200 Indian missions abroad, 38 export promotion councils and key government departments, both at the Centre and in the states. He signalled that export would be a top priority for his government, which galvanised the sector. The commerce ministry then drew up exports targets for all missions, export councils and states. Daily, weekly and monthly followups were done to ensure there was no slippage. The paperwork for exporters was reduced or simplified to expedite processing and tax concessions made wherever possible. The finance ministry played its part by clearing export arrears of over Rs 55,000 crore and approving an interest equalisation scheme. These actions boosted cash flow and energised exporters. The result? The impossible was made possible. The target of $400 billion was more than achieved.
What came as a downer though was that imports had ballooned because of the higher global prices of petroleum, coal, cooking oil, gold and electronic goods. Petroleum prices, for instance, went up by as much as 94 per cent. So, the overall trade deficit widened to $192 billion in FY22. It would have been higher, but for the phenomenal growth of exports. The challenge for FY23 is to boost exports even further by concentrating on developing new markets and signing new trade deals, similar to the ones inked with the UAE and Australia recently. The commerce ministry is now negotiating with the UK, Canada, Europe and the US and hopes that they will fructify in the current financial year. Goyal is confident of significantly raising the FY23 target and is pushing for merchandise exports to touch $1 trillion by 2030. That’s a tall order but, as Subrahmanyam says, “We are bullish about accomplishing it.” ■
THE UNION MINISTER of road transport and highways was a busy man during the pandemic. Nitin Gadkari worked with different state governments to ensure that road and highway construction continued without any obstructions. He released payments to vendors and companies on time. Analysts give him full marks for keeping the pace of road and highway construction going even as the world and India reeled under the virus’s attack. Ministry data say the pace of highway construction has gone up from 12 km a day in 2014-15 to 37 km in 2021-22. The total length of national highways grew from 91,287 km (in April 2014) to 141,000 km in December 2021.
In 2020, an ambitious National Infrastructure Pipeline was announced; it now includes 9,335 projects and an investment of Rs 108 lakh crore between 2019-20 and 2024-25. Gadkari is spearheading the roads section of the push, which constitutes about 23 per cent of the pipeline. The ministry also has a huge asset monetisation target of Rs 30,000 crore for 202223—of which Rs 17,000 crore has apparently been realised so far.
One reason for the big improvement, says Vinayak Chatterjee, chairman of the Confederation of Indian Industry (CII) national task force on infrastructure projects, is that more stringent norms are now in place to select contractors. “Earlier, there were highway contractors who did not have the competence,” he says.
Gadkari has also broken the contractors’ coterie and brought a lot of regional players into the fray. Analysts say the latter have the competence to see projects through. The minister has built a reputation of a doer, with a unique ability to work with state ministers across party lines. The Hybrid Annuity Model, a variant of the public-private partnership model, where the government bears 40 per cent of the project cost, has also played a positive role in encouraging investments in the sector, according to an analysis by Moody’s Investor Services. The model was quite successful initially as NHAI awarded almost 55 per cent of its projects through it in 2016-17. But there has been a decline since then, with experts making a case for tweaking the model. ■
PPRIME MINISTER NARENDRA MODI’S CHOICE of Ashwini Vaishnaw as the railways, telecom and IT minister in July last year surprised many. Always a backroom player in the PM’s team, Vaishnaw was brought to the fore to streamline reforms in these crucial ministries. The soft-spoken Vaishnaw is a former bureaucrat of the Odisha cadre who quit to pursue a management course at Wharton and later worked with GE and Siemens before launching his own venture in 2014. In the railways, Vaishnaw is using his skills to smoothen ties between warring unions and the railways administration, augment capacities to manufacture the locomotives, coaches and other rolling stock; develop indigenous signal networks and infrastructure along with building the infrastructure to take the railways to newer corners of the country.
At the railways ministry, Vaishnaw has picked up the thread from an earlier failed attempt to bring in private capital to run passenger trains and to corporatise the railways’ manufacturing units. There was also the trust deficit among the officers and the unions to deal with. The former was worried about the restrictions on the railway board and the mergers of the railways cadre—which would have disrupted their seniority—and the unions were upset that the railways was moving towards privatisation, hurting their job security.
The first thing Vaishnaw did was to put a lid on the privatisation rumours. None of his predecessors managed to bring in regulators in the railways—the single biggest deterrent to private investment, especially in operations. Vaishnaw, too, is not in a position to push through this reform immediately. What he did do is accelerate the work on the indigenously developed automatic train protection (ATP) system, Kavach. He scrapped the plans to import the system from European companies. In the past
six months, Kavach has been rolled out on the New Delhi-Howrah and New Delhi-Mumbai sections and is targeted for completion by March 2024. Thirdly, he won the confidence of the unions by committing that private capital will come in only into capacity-building, and the units will not be corporatised. Further, his understanding of technology and the skills picked up during his corporate jobs came in handy while designing a new PPP model, where private capital is sought to upgrade the existing facilities to manufacture rolling stocks, with investors allowed to take existing railway staff on deputation in their operations at these units.
The idea is to enhance their skill sets for future-ready technologies. This model has also cut down the capital expenditure requirements from the corporates. The railways has already started the process to select the partners for manufacturing 800 high-end electric 12,000 HP locomotives for freight carriage and modern LHB (Linke Hoffmann Busch) coaches at their existing factories.
The biggest test for Vaishnaw will be realising the dream of running 400 indigenously designed and developed semi-high speed Vande Bharat trains on existing tracks in the next three years. He says the prototypes will be ready by August and, based on their trials, commercial production will start in the next 45 days. His mid-term goal is to run these trains on 75 routes by Independence Day next year.
The train sets—self-propelled locomotives linked together with the coaches to form a unified set—will ensure a more comfortable ride than premium trains like the Rajdhani and Shatabdi. By Diwali, the railways is expected to get 4-5 trains every month, to run on some routes connecting Ahmedabad, Delhi, Lucknow, Bhopal, Guwahati, Kolkata, Tirupati, Pune, Chennai etc. Currently, Vande Bharat trains are running on the DelhiKatra and Delhi-Lucknow routes. ■