Publication | Page 161 | Manohar Parrikar Institute for Defence Studies and Analyses (2024)

The Current Kashmir Imbroglio: Causes and the Way Ahead April-June 2018 D.S. Hooda

On 8 July 2016, a group of soldiers and policemen surrounded a house in Bumdoora village of south Kashmir. As search of the house started, one policeman was fired at and injured. By the time the encounter ended three terrorists had been killed; one of them was Burhan Wani, a Hizbul Mujahideen leader. Following the killing, Kashmir erupted in a wave of protests.

Jammu and Kashmir Inherent Structural Constraints Challenging India’s Internal Security April-June 2018 G.K. Pillai

The words ‘internal security’ do not figure in the Constitution of India. At the time of the framing of the Indian Constitution, the lawmakers were more worried about preserving the unity and sovereignty of the new nation. The world was in a far more peaceful environment and issues like terrorism and cybersecurity were far from their minds. Their outlook was conditioned by the constitutions then in existence. The thought was that all law and order situations could be handled by the state governments and the role or duty of the Union government (Article 355) was to protect the states from external aggression and internal disturbances and to ensure that governance is carried on in accordance with the provisions of the Constitution.

Implications of CAATSA for India’s Defence Relations with Russia and America April 26, 2018 Laxman Kumar Behera, G. Balachandran

Recent reports have highlighted that India’s planned defence procurement from Russia could potentially come under US sanctions under a newly enacted law, Countering America’s Adversaries through Sanctions Act (CAATSA).1 The Act, if implemented in its extreme form, has the potential to adversely affect India’s defence purchases from its traditional partner, Russia, besides putting to test India’s growing defence and security relations with the United States. This Brief examines CAATSA and its likely implications for India’s defence and security cooperation with two of its main arms suppliers, Russia and the United States.

Understanding CAATSA

CAATSA was passed overwhelmingly by the US Congress and signed reluctantly by President Donald Trump.2 Enacted on August 2, 2017, it aims to counter the aggression by Iran, Russia and North Korea through punitive measures.3 Title II of the Act primarily deals with sanctions on Russian interests such as its oil and gas industry, defence and security sector, and financial institutions, in the backdrop of its military intervention in Ukraine and its alleged meddling in the 2016 US Presidential elections. Section 231 of the Act empowers the US President to impose at least five of the 12 listed sanctions — enumerated in Section 235 of the Act — on persons engaged in a “significant transaction” with Russian defence and intelligence sectors. Two of the most stringent of these sanctions are the export licence restriction by which the US President is authorised to suspend export licences related to munitions, dual-use and nuclear related items; and the ban on American investment in equity/debt of the sanctioned person. Some other sanctions, which are of not much relevance to India, include restriction on US Export Import Bank assistance; prohibition on loans from international financial institutions; exclusion from participation in US government procurement; and visa restrictions on corporate officers of the sanctioned entities.

Subsequent to the enactment of the Act, the US President has delegated his powers to the Secretary of State to implement Section 231 in consultation with the Treasury Secretary. As part of Section 231 of the Act, the Department of State has notified 39 Russian entities, dealings with which could make third parties liable to sanctions. These include almost all of the major Russian companies/entities such as Rosoboronexport, Almaz-Antey, Sukhoi Aviation, Russian Aircraft Corporation MiG, and United Shipbuilding Corporation which are active in manufacturing defence items and/or their exports. The list also includes a few entities from the intelligence sector (Table 1).

It is important to mention that among the 39 entities, Rosoboronexport, the Russian state-controlled intermediary for export/import of arms, also figures in the list notified on April 6, 2018 by the Office of Foreign Asset Control (OFAC) of the Department of Treasury, in pursuance of various Executive Orders, besides CAATSA.4 The significance of Rosoboronexport finding its name in the OFAC’s list is that, apart from all of its assets subject to US jurisdiction being frozen, any non-American person facilitating significant transactions with it will also be liable to face sanctions by the United States.5

It is to be noted, however, that the mere naming of 39 Russian entities by the US authorities or dealings by any country with these entities does not automatically lead to the imposition of sanctions under the CAATSA provisions. The key determinant for imposing sanctions is “significant transaction” between the named Russian entity and an outside agency. It is also important to note that the determination of what is a significant transaction is not based purely on the monetary value. As explained by the Public Guidance/Frequently Asked Questions (FAQ) issued by the State Department:

The factors considered in the determination may include, but are not limited to, the significance of the transaction to US national security and foreign policy interests, in particular whether it has a significant adverse impact on such interests; the nature and magnitude of the transactions; and the relation and significance of the transaction to the defence or intelligence sector of the Russian government.6

It is significant to note that no sanctions have yet been imposed on any country, though US officials claim that they have been quite successful in persuading a few potential buyers from buying Russian arms. In a special briefing on January 30, 2018, senior State Department officials boasted that their global outreach on Section 231 has “turn[ed] off potential deals that equal several billion dollars. And that is real success, it’s real money, and it’s real revenue that is not going to Russia as part of this law.”7 Despite CAATSA having been enacted in August 2017, Rosoboronexport officials noted that, in 2017, the geographical spread of Russian arms export agreements expanded to cover 53 countries, earning the country revenues totalling US$15 billion.8

India’s Arms Procurement: Role of Russia and other Major Suppliers

India faces one of the most complex security environments in the word that spans the full spectrum of conflict from nuclear to sub-conventional war, and the possibility of a two front war. Apart from cross-border terrorism and growing radicalisation in its immediate and extended neighbourhood, India’s security landscape is challenged by the unresolved border disputes with Pakistan and its ‘all-weather friend’, China. Between these two traditional rivals, it is China which is increasingly becoming unpredictable for India’s security calculus. China’s increasing military activism under its life-time president, supported by an unpreceded increase in military spending — which has made it the second largest military spender in the world — is of particular concern to India. Its military assertion, including recently in Doklam, and growing military encirclement of India through land- and sea-based infrastructure networks in the Indian Ocean Region, pose a grave challenge to India in the foreseeable future.

In order to meet the myriad security challenges, it has been a constant endeavour of India to strengthen its defence preparedness, by equipping its armed forces with state-of-the-art arms. Towards this end, India has spent a great deal of resources, with the defence budget for 2018-19 amounting to Rs 2,79,305 crore (US$43.4 billion). By virtue of the size of the defence budget, India has a significant arms procurement spend (Rs 74,116 crore or $11.3 billion in 2018-19), which is funded through the allocation for capital expenditure in the defence budget. In 2018-19, the defence capital expenditure amounts to Rs 93,982 crore ($14.3 billion), which represents 34 per cent of the defence budget and 31 per cent of total central government capital expenditure. Much of the procurement budget is, however, spent on importing arms, indicating the deficiency in India’s defence R&D and manufacturing capability. Heavy dependence on foreign arms has earned India the dubious distinction of being one of the largest arms importers in the world. According to the US Congressional Research Service, during the period 2008-2015, India was the second biggest recipient of arms among the developing countries, with deliveries received totalling $26.4 billion.9

While importing arms, India has, since independence, followed a policy of diversification, which has led it to source weapons from more than two dozen countries. Nonetheless, the Soviet Union (and later Russia) has been the main source of India’s arms imports since the 1960s when India first signed the MiG-21 fighter deal. Other significant suppliers of arms include the UK, France, Israel and the United States. Among these, the US has, in particular, been quite successful in bagging multi-billion dollar arms contracts in recent years, thanks to the 2005 India-US nuclear deal, in which US defence contractors “played a part” in passing a key legislation in the US Congress.10 Between 2013-14 and 2015-16, the US has won 13 contracts worth Rs 28,895 crore ($4.4 billion). Both in term of the number and value of contracts, the US is way ahead of other major suppliers (Table 2). In percentage terms, the US share of Indian arms imports total 23 per cent in terms of the number of contracts and 54 per cent by value.

Since 2008, the US has bagged more than $15 billion in arms deals including for the C-17 Globemaster and C-130J transport planes, P-8 (I) maritime reconnaissance aircraft, M777 light-weight howitzer, Harpoon missiles, and Apache and Chinook helicopters.11 This value is all set to increase further with the US likely accepting an Indian request for Sea Guardian drones. In addition, US defence contractors, including Lockheed Martin and Boeing, are also strong contenders for a number of high-profile arms deals, including the recently floated tender notices for 110 fighter planes for the Indian Air Force, 57 Multi-Role Carrier Borne Fighters for the Indian Navy, and 234 naval utility and multi-role helicopters.

The success of the US, and also Israel to a large extent, in the Indian arms market has its effect on Russian supplies, though Moscow still remains India’s predominant defence supplier. As per the Stockholm International Peace Research Institute (SIPRI) Arms Transfer Database, during the period 2010-17, Russia was the top arms supplier to India, with total deliveries amounting to 19.8 billion Trend Indicator Values (TIV),12 followed by the US (3.05 billion TIV), and Israel (2.5 billion TIV). In percentage terms, however, the Russian share in India’s arms imports during the same period has declined to 68 per cent, from an all-time high of 74 per cent during the 2000s, whereas the combined share of the US and Israel has increased from nine to 19 per cent. Between 2013 and 2017, Russia’s share declined further to 62 per cent, whereas the combined share of US and Israel increased to 26 per cent.13 Accounting for about 15 per cent, the United States is the second biggest supplier of arms to India during the five year period ending 2017. Between 2000-2009 and 2010-17, US arms deliveries to India have increased by a whopping 1470 per cent. Figures 1 and 2 portray the summary of India’s main arms suppliers and their share since the 1950s.

Behind the curtain of Russian dominance also lies the criticality of India’s defence preparedness and indigenous manufacturing. It is needless to say that the bulk of the potent weapons in India’s arsenal are of Soviet/Russian origin and that some of these are not available for purchase from any other source, even for love of money. The nuclear submarine INS Chakra, the Kilo-class conventional submarine, the supersonic Brahmos cruise missile, the MiG 21/27/29 and Su-30 MKI fighters, IL-76/78 transport planes, T-72 and T-90 tanks, Mi-series of helicopters, and Vikramaditya aircraft carrier are all sourced from India’s traditional Cold War partner. Similarly, from the point of view of indigenisation and self-reliance efforts, which are being reinvigorated through the present government’s Make in India programme, Russian technologies constitute the mainstay of India’s licence-based manufacturing.

Implication on India’s Arms Procurement from Russia

CAATSA, if implemented in its stringent form, is likely to affect India’s arms procurement from Russia in a number of ways. First, India’s planned procurement from Russia, particularly the S-400 air defence system, Project 1135.6 frigates and Ka226T helicopters, will come under the immediate scanner of US authorities, as they are mandated to deter exports of key Russian defence entities. In all likelihood, US authorities will try to influence their Indian counterparts to ignore the Russian platforms, though it is entirely up to New Delhi to make its own judgement. Second, CAATSA is likely to affect all the joint ventures (JVs) – existing or planned — between Indian and Russian defence companies. Some of the existing JVs that may come under the scanner are: Indo Russian Aviation Ltd, Multi-Role Transport Aircraft Ltd and Brahmos Aerospace. Third, the Act will also affect India’s purchase of spare parts, components, raw materials and other assistance for which Indian entities are dependent on Russia for domestic licence manufacturing and maintenance of existing equipment.

CAATSA and India-US Defence Cooperation

CAATSA has the potential to heighten India’s traditional insecurity about the United States as a reliable partner, and sour New Delhi’s defence and security cooperation with Washington at a time when the US is projecting India as a key partner in its Indo-Pacific strategy, with the US National Security Strategy 2017 explicitly supporting New Delhi’s vital role in this regard.14 The biggest question therefore is how and to what extent CAATSA is going to affect India-US defence and security cooperation. It all depends on how lightly or stringently CAATSA provisions are imposed. Apart from the standard waivers that the US President enjoys on the grounds of national security interests, there are plenty of conciliatory remarks from higher American authorities, which indicate that Washington may take a lenient view of CAATSA in regard to India’s defence cooperation with Russia. For instance, Admiral Harry Harris, Commander of the US Pacific Command, referred to a classified letter written by Secretary of Defense James Mattis to the concerned members of the Senate Committee on Armed Services, wherein Secretary Mattis has requested for “some relief from CAATSA” for countries like India.15 In his argument, Admiral Harris has also favoured relief citing the “strategic opportunity” that India presents to the US and also the opportunity “to trade in arms with India.” Other senior US defence department officials have also made similar statements favouring the adoption of a lenient view for India’s defence procurement from Russia.

The conciliatory remarks from high US officials are not surprising given that the sanctions on India or any of its entities and persons will bring bilateral defence cooperation to a halt, as the Indian Ministry of Defence will not be able to engage its US counterpart, including on arms trade that Admiral Harris was referring to. That, in turn, would force India to reverse its declining arms dependence on Russia, while arresting the upward trend in India-US defence trade. More importantly, any US sanctions on India will be counterproductive to America’s own strategic interests vis-à-vis China. Needless to say that an adversely affected Indian defence posture will end up tilting the military balance in favour of China, whose military assertion in the Indo-Pacific region bothers both Washington and New Delhi.

The extent to which CAATSA would affect Indo-US defence relations will depend on what sanctions, if any, Washington decides to impose on New Delhi in view of India’s continued defence cooperation with Russia. As mentioned earlier, the President, through the State Department, is required to impose a minimum of five out of the 12 listed sanctions as and when he takes such a decision. It may, however, be noted that of the 12 listed sanctions, only two —suspension of export licence and ban on American equity/debt investment in Indian entities —have some relevance for India, with others having little practical impact. The suspension of the licences will bar American companies from participating in Indian defence contracts, apart from forcing them to stop providing maintenance support for the defence equipment that India has already bought from the US. The latter will jeopardise India’s defence preparedness in respect to existing inventory of US equipment. It is however to be noted that US companies reneging on on-going contractual obligations citing the US government’s action is not liable to be excused under existing Force Majeure provisions stipulated in the Defence Procurement Procedures.16 On the other hand, as per the MoD’s existing Guidelines on Penalties in Business Dealings with Entities, such reneging of contractual obligations will attract either suspension or ban of the concerned companies.17

The ban on equity/debt investment will place in jeopardy the Joint Ventures that American defence companies have formed with Indian companies in recent years. Moreover, American companies will be barred in the future from forming any Joint Ventures with their Indian counterparts to take part in several mega procurement contracts that the MoD is aggressively pushing through its newly announced Strategic Partnership (SP) model as part of its Make in India and diversification policies. In other words, the US has much to lose if it imposes CAATSA on India. Besides, it will be a huge set back to the emerging defence and security cooperation that has led to India signing a logistics pact with the US, American arms deals with India booming from near zero to over $15 billion in a matter of less than a decade, the US designating India as a Major Defence Partner, and both countries actively cooperating in various security forums including in the newly formed Quad. Given this, and the fact that Russian weapons in Indian hands do not threaten American national security interests directly, it will be extremely unwise on the part of the US to impose any CAATSA-related sanctions, least of all its two most stringent ones related to export control and equity/debt investment, on India.

Conclusion

While CAATSA is unlikely to be imposed on India anytime soon, it is nonetheless a dampener on an otherwise booming defence relationship between India and the United States. As a sovereign country, India cannot be dictated to go slow or suspend its existing or future defence cooperation with Russia. It is also practically impossible for India to ignore Russia in view of the latter’s importance in meeting some of the critical defence hardware requirements of the Indian armed forces and also because of the overwhelming share of Russian weaponry in the Indian arms inventory, the upkeep of which necessitates New Delhi’s continued dependence on Moscow for the foreseeable future. Indian defence decision makers may like to impress this critical aspect upon their American interlocutors and find suitable mitigation. At the same time, India also needs to be prepared for any eventual CAATSA-related sanctions, which, though unlikely in the immediate future, may surface in the long run. India may safeguard its interests by expanding the scope of its existing guidelines for penalties in business dealings to include a provision for banning defence companies of countries which resort to banning entities of other countries for foreign policy purposes. Moreover, India may also like to be cautious while issuing multi-billion dollar arms tenders to countries that are perceived to be unreliable.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.

• 1. Lalit K Jha, “US concerned over Russian sanctions' implications on India”, http://ptinews.com/news/9622058_US-concerned-over-Russian-sanctions---im...
• 2. Peter BakerandSophia Kishkovsky, “Trump Signs Russian Sanctions Into Law, With Caveats”, The New York Times, August 02, 2017, https://www.nytimes.com/2017/08/02/world/europe/trump-russia-sanctions.html
• 3. “Countering America’s Adversaries Through Sanctions Act”, https://www.treasury.gov/resource-center/sanctions/Programs/Documents/hr...
• 4. US Department of Treasury, “Treasury Designates Russian Oligarchs, Officials, and Entities in Response to Worldwide Malign Activity”, Press Release, April 06, 2018, https://home.treasury.gov/news/press-releases/sm0338
• 5. Ibid
• 6. US Department of State, “Public Guidance/FAQ”, October 27, 2017, https://www.state.gov/t/isn/caatsa/275118.htm
• 7. US Department of State, “Background Briefing on the Countering America's Adversaries Through Sanctions Act (CAATSA) Section 231”, January 30, 2018, https://www.state.gov/r/pa/prs/ps/2018/01/277775.htm
• 8. Rosoboronexport, “Rosoboronexport Expands Geographical Scope of Military Technical Cooperation”, Press Release, February 7, 2017, http://roe.ru/eng/press-service/press-releases/rosoboronexport-expands-g...
• 9. Catherine A. Theohary, “Conventional Arms Transfers to Developing Nations, 2008-2015”, CRS Report, December 19, 2016, p. 48, https://fas.org/sgp/crs/weapons/R44716.pdf
• 10. Shyam Saran, How India Sees the World: Kautilya to the 21st Century, Juggernaut: New Delhi, 2017, p. 215.
• 11. “Enhancing Defence and Security Cooperation with India”, Joint Report to Congress, July 2017, p. 4, https://www.defense.gov/Portals/1/Documents/pubs/NDAA-India-Joint-Report...
• 12. TIV is a statistical unit used by the SIPRI to measure the “volume of international arms transfer of conventional arms.” It is “based on the known unit production costs of a core set of weapons and is intended to represent the transfer of military resources rather than the financial value of the transfer.” See https://www.sipri.org/databases/armstransfers/sources-and-methods. It may, however, be noted that as an indicator of arms trade, especially with respect to India, SIPRI’s data is debatable. As an example, according to the Indian government, the cost of a Rafale fighter is Rs 607 crore (~$100 million) and that of a SU-30MKI is less than $35 million, while SIPRI’s TIV is 55 million for both. More importantly, SIPRI includes Hindustan Aeronautics Ltd’s licence production of SU-30MKI and Ordnance Factory Board’s licence production of T-90 tank as part of its trade data. For a critique of SIPRI’s TIV, see G. Balachandran, “International Arms Transfers: A Study”, in Jasjit Singh (ed.), Conventional Arms Transfers, New Delhi: Institute for Defence Studies and Analysis, 1995, pp. 48–59.
• 13. Peter D. Wezeman et al., “Trends in International Arms Transfers, 2017”, SIPRI Factsheet, March 2018, https://www.sipri.org/sites/default/files/2018-03/fssipri_at2017_0.pdf
• 14. See “National Security Strategy of the United States of America”, December 2017, https://www.whitehouse.gov/wp-content/uploads/2017/12/NSS-Final-12-18-20...
• 15. US Senate, “Hearing to receive testimony on United States Pacific Command in review of the defence authorization request for fiscal year 2019 and the future years defence program”, Stenographic Transcript, March 15, 2018, https://www.armed-services.senate.gov/imo/media/doc/18-27_03-15-18.pdf
• 16. Force Majeure, which is a standard provision in any contract, excuses either of the contracting party from non-fulfilment or delayed fulfilment of contractual obligations. See Ministry of Defence, Defence Procurement Procedure 2016, p. 173, https://mod.gov.in/dod/sites/default/files/dppm.pdf_0.pdf
• 17. See Para C of Ministry of Defence, “Guidelines of the Ministry of Defence for Penalties in Business Dealings with Entities”, November 21, 2016, https://mod.gov.in/dod/sites/default/files/guideentities_0.pdf

Defence Economics & Industry Defence Acquisition, Defence Cooperation, India-Russia Relations, US Sanctions system/files/thumb_image/2015/s-400-russia.jpg Defence Investor Cell Needs Fleshing Out April 24, 2018 Amit Cowshish

The Department of Defence Production (DDP) has set up a Defence Investor Cell under the chairmanship of a Joint Secretary. The office order issued by DDP in February 2018 has assigned an amazing range of roles and responsibilities to the Cell, most of which are inadequately defined.

Among other responsibilities, the Cell has been tasked to facilitate several functions: investment in the defence sector, process of acquisition of industrial and export/import licenses, formation of joint ventures (JVs), transfer of technology (ToT), and the search for strategic partners for the potential investors. The office order does not say how the Cell would facilitate these tasks.

Investment in the defence sector is sluggish not because of the absence of a facilitating agency but on account of there being no compelling business case for making heavy investments. Arguably, the investment so far has been commensurate with the quantum of business being given to the private sector entities. To be sure, there are several other reasons, including the de facto cap of 49 per cent on foreign direct investment (FDI), which account for the disinterest shown by investors.

As in the case of investment, the grant of industrial and export/import licenses also does not pose any serious problem that requires the intervention of a government facilitating agency. It, therefore, needs to be made clear as to what it is that the applicants can expect from the Cell, especially because licences are granted by the Department of Industrial Policy and Promotion and the Ministry of Home Affairs on which the Cell may not have much influence.

The responsibilities of facilitating the formation of JVs, ensuring ToT and searching for strategic partners for the potential investors assigned to the Cell appear to be a case of bureaucratic overreach. As of now, the MoD does not have domain expertise to handle these task. And, at any rate, there is no reason for the ministry to get itself entangled in such business-to-business dealings. It is best left to the private sector entities to work out arrangements and tie-ups among themselves. To meddle in this would be contrary to the government’s policy of minimum government and maximum governance.

It is possible that the Cell’s role with regard to the formation of JVs and ToT is to be limited to facilitating a dialogue between the Ordnance Factory Board (OFB) and the Defence Public Sector Undertakings (DPSUs), on the one hand, and the private sector entities, including foreign companies, on the other. Even if that were to be the case, it may amount to interference in the affairs of these organisations, which need greater autonomy to take commercial decisions.

The ministry’s track record on managing ToT has also not been very encouraging. DPSUs and OFB, both of which are under the administrative control of the DDP, have had problems in the past in obtaining and absorbing technologies from foreign companies. Perhaps, the best that the Cell could do in the immediate term is to revise the 2012 guidelines on the formation of JVs between DPSUs and private sector entities which have not had a very successful run.

All this leaves the Cell with some run-of-the-mill responsibilities, such as providing ‘advisories regarding the ‘Defence Procurement Process various Make procedures’ (sic) and ‘Offset Policy and Offset Discharge’ (sic). That advisories – whatever they might mean – should be required to be issued on the defence procurement process and the ‘Make’ procedure reflects poorly on textual clarity in the Defence Procurement Procedure (DPP) 2016 which covers both.

If the intention is that the Cell will issue clarifications on the procurement procedure in general, it ought to function directly under the Defence Acquisition Council (DAC) or the Defence Procurement Board (DPB) and not under a Joint Secretary in the DDP since defence procurement does not fall in the DDP’s charter of duties.

The Cell being assigned the task of issuing advisories in respect of offsets is baffling, not least because a Facilitation Cell of the Defence Offsets Management Wing (DOMW) is already functioning under the DDP since February 2014, ostensibly for answering the queries on offsets of existing and potential Indian Offset Partners (IOPs) as well as foreign vendors.

There is a similar overlap between the Cell and other organisations in respect of the task of facilitating the availability of public sector testing infrastructure for testing requirements of the industry particularly the Micro, Small and Medium Enterprises (MSMEs). These facilities are presently available with the OFB, DPSUs, the Services, and the Defence Research and Development Organisation (DRDO).

The list of testing facilities available with the DRDO and OFB are available on their respective websites. Similar lists with respect to the Services and the DPSUs must already be available, or can be made available, on their respective websites. Besides providing the link to all these lists on its webpage, it must be specified what more can the Cell be expected to do to facilitate the availability of these testing facilities to Indian industry and what in particular it can do to help the MSMEs.

The Cell has also been tasked to assist investors in identifying the location for the proposed investments and help the MSMEs/start-ups explore various outsourcing opportunities offered by the OFB and DPSUs. The Cell could set the ball rolling by posting on its website the information and contact details of various state governments which are actively engaged in wooing the investors. This should be followed up by the provision of access to information regarding outsourcing opportunities in a format which helps the MSMEs. It will help if the format were to be decided in consultation with the MSME associations.

Assisting the MSMEs and start-ups in identifying various outsourcing opportunities offered by the OFB and the DPSUs is one of the few responsibilities that the Cell could play some meaningful role in since both are under the administrative control of the DDP. But what is not clear is what exactly that role would be.

The Cell’s webpage says that comprehensive guidelines have been issued by these organisations, which include vendor development for indigenisation and import-substitution. It will be of immense help if the Cell were to provide the link to these guidelines on its webpage, followed by a clear indication as to how it intends to make DPSUs and the OFB handhold the MSMEs and the start-ups.

The DDP’s office order requires the Cell to work in coordination with ‘Invest India’ in respect of issues being addressed by the latter. Invest India is a not-for-profit National Promotion and Facilitation Agency under the DIPP that acts as the first point of reference for investors in India. It would have been better to let Invest India handle the responsibilities now entrusted to the Cell because, besides offering one-stop services to investors, the task could have been managed more professionally. But now that the Cell has been set up, it must be empowered to discharge the responsibilities cast upon it. Care must be taken to ensure that its functioning does not get hamstrung because of the ad hoc nature of its set up and bureaucratic inflexibility.

In the initial stage, the Cell is to have four officers, drawn from DPSUs and the OFB, with expertise in aerospace, electronics, naval and land systems. With the Director (P&C) as its nodal officer, the Cell would be attached to the Directorate of Planning and Coordination and function under the overall charge of a joint secretary in the DDP. The Cell will remain hamstrung if its powers are not clearly defined, especially in regard to securing budgetary support which is to be provided by the Director General of Quality Assurance.

Considering that the Cell is mandated to interact with investors, it is inexplicable that it has been located in the D-I Wing of Sena Bhawan, which falls in the highly protected security zone. To begin with, the Cell must be relocated to a place that is freely accessible to potential investors.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.

Defence Economics & Industry Defence Planning, Defence Production system/files/thumb_image/2015/dhanush-artillery-gun.jpg India and China – Time for a dialogue on nuclear security? April 19, 2018 Rukmani Gupta

Discussions on nuclear security in South Asia generally focus on the India-Pakistan relationship. Given the volatile military equation and frequent sabre-rattling between these two neighbours, that is unsurprising. China as a nuclear power that has a bearing on nuclear security and stability in South Asia is discussed in India primarily in terms of its nuclear relationship with Pakistan – the materiel and technology that Indian analysts believe China provides to bolster Pakistan’s nuclear weapons programme. That the India-China relationship might itself merit a discussion on issues of nuclear security, perhaps even Confidence Building Measures (CBMs), is seldom mooted. A dialogue on nuclear security between the two is supposed unnecessary since – a) Chinese analysts maintain that India’s nuclear capability is apparently inconsequential and China does not believe it is in a deterrence relationship with India; b) given that no shots have been fired along the disputed border, there is no realistic scenario in which the two states would enter into a military conflict; and, c) both countries have a declared no-first-use (NFU) policy, which is believed to be guarantee enough against nuclear escalation. There are, however, many reasons to re-examine this comfortable assessment of the impossibility of nuclear escalation between India and China.

Chinese scholars continue to state that China’s technological superiority implies that India’s nuclear weapons capabilities do not pose a threat to China and that India does not feature in China’s nuclear calculus. This seems singularly peculiar given that Indian analysts and even ministers have repeatedly stated that India’s nuclear deterrent is primarily a safeguard against nuclear blackmail by China. Despite the overt unwillingness to acknowledge the reality of a neighbour with nuclear weapons, Chinese views of Indian capabilities are certainly changing. This is best exemplified in the changing tone of statements made by Beijing in response to India’s missile tests. In the wake of India’s first intercontinental ballistic missile test of Agni V in 2012, the spokesperson for China’s Ministry of Foreign Affairs (MoFA) did not so much as allude to the missile test and emphasised only that China and India were cooperative partners rather than rivals.1 By 2016, when India undertook the fourth Agni V test, China’s reaction to the test was very hostile. Not only did the MoFA spokesperson insinuate that India’s missile test was in violation of United Nations Security Council Regulations, but also sought clarity on its “intentions”.2 From muted reactions that seemed to ignore missile development to belligerent statements that place the blame for destabilising South Asia at India’s door, there has clearly been a change in perception regarding India’s nuclear capabilities within the Chinese government. When considered along with the fact that China maintains nuclear missile launch sites and storage facilities in the provinces bordering India, it seems reasonable to suppose that China’s security assessments do actively account for India’s growing nuclear capabilities.

It would be wilful ignorance to deny that the bilateral relationship between India and China remains hostage to the territorial dispute which is becoming increasingly acrimonious. Perhaps, as a prelude to the final settlement of the outstanding border dispute and with a view to bolstering their respective negotiating positions, both sides are seeking to increase their areas of “regular” operations in disputed territory. This has not only led to a steady increase in the number of border “transgressions” logged by each country, but also brought troops in face-offs more frequently. While it is true that the India-China border has not seen skirmishes of the sort witnessed on India’s borders with Bangladesh or Pakistan involving the use of small arms or artillery and can thus be termed provisionally “peaceful”, fisticuffs and stone-throwing along the Western border3 indicate that tensions remain high.

As India and China compete for greater influence in the Asia-Pacific, this history of mistrust and the legacy of an unresolved territorial dispute continue to dog their diplomatic efforts. A zero-sum analysis predominates assessments of foreign policy. India’s ‘Act-East’ policy is assessed by Chinese scholars as an attempt by India to position itself as an economic and military alternative to China in Southeast Asia. China’s Belt and Road Initiative is viewed with suspicion in India not merely because there is lack of clarity on the details of the vision, but also because the reflex with regard to developments concerning China is one of assessing what India might lose. The possibility that efforts by both countries in Southeast Asia and beyond can be synthesised for mutual benefit is considered utopian.

The stand-off at Doklam demonstrated that they could well become embroiled in territorial disputes that are not strictly bilateral. Could a similar stand-off occur in the South China Sea if Indian naval vessels were to be challenged by the People’s Liberation Army (PLA) Navy? The rapid militarisation of features controlled by China in the disputed waters of the South China Sea along with the active expansion of China’s area of operations in the region make this a real possibility. Chinese investment and military presence in the China-Pakistan Economic Corridor too raises the prospect of Chinese military involvement in conflict between India and Pakistan in the area.

What does a declared NFU policy mean when there exists a trust deficit between two countries? How far can declaratory positions be relied upon in the event of a conflict? Leaders in both countries have stoked nationalism in aid of legitimising their positions in power. In the event of a military conflict, how would a country losing a conventional war explain adherence to NFU to its domestic constituency? Does the reliance on declared NFUs make military conflict more likely given the assurance that the adversary will not use nuclear weapons?

Even as far as the declaratory postures of the two countries are concerned, there appears to be continued uncertainty. From a recommendation attributed to the third National Security Advisory Board for India to consider withdrawing from a NFU commitment in 2003,4 to remarks made in 2016 by then defence minister Manohar Parrikar suggesting that India need not bind itself to NFU,5 there has been recurring speculation that India is reconsidering its NFU policy. Similar speculation over changes in China’s nuclear posture is also ongoing. Within China there are scholars who emphasise the need to review China’s NFU position.6 Furthermore, discussion over the possible loss of China’s retaliatory strike capabilities has led to suggestions since 2013 at least that the PLA implement a hair-trigger alert in the event of a confirmed incoming attack.7 Given President Xi Jinping’s emphasis on combat-readiness and restructuring the military for a rapid response, the idea does not seem far-fetched. If Xi condones some version of a “launch on alert” mechanism, it could potentially lead to accidental or mistaken launch triggered by a false alert since the fallibility of detection and monitoring systems has been amply demonstrated in the past.

That there will be no nuclear escalation between India and China has become conventional wisdom. The growing capabilities, competing aspirations and overweening hubris of these two neighbours, however, suggest that reliance on accepted assumptions will lead to complacency. It may therefore be time for India and China to discuss nuclear issues bilaterally with a view to mediating the uncertainties borne of their differing perspectives and postures.

Rukmani Gupta is a New Delhi based Defence and Security Analyst

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.

• 1. Zhang, CC. (2012, 20 April). China says India is a 'partner, not rival' after missile launch. CNN. Retrieved 23 January 2018, from https://edition.cnn.com/2012/04/20/world/asia/china-react-india-missle/index.html
• 2. Ministry of Foreign Affairs of the Republic of China (2016, 27 December). Foreign Ministry Spokesperson Hua Chunying's Regular Press Conference on December 27, 2016. Retrieved 23 January 2018, from http://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/t1427046.shtml
• 3. Times of India. (2017, 19 August. Watch: Scuffle between Indian and Chinese soldiers near Ladakh's Pangong Lake [Video file]. Retrieved from https://www.youtube.com/watch?v=V7szW8u52I0
• 4. Rediff. (2003, 9 January). Abandon no-first use policy, Security Board tells govt. Rediff News. Retrieved 25 Jan 2018, from http://www.rediff.com/news/special/ia/20030109.htm
• 5. Chaudhury, DR. (2016, 11 November). Why bind ourselves to 'no first use policy', says Manohar Parrikar on India's nuke doctrine. The Economic Times. Retrieved 25 January 2018, from https://economictimes.indiatimes.com/news/defence/why-bind-ourselves-to-no-first-use-policy-says-parrikar-on-indias-nuke-doctrine/articleshow/55357808.cms
• 6. For a summary of these views see lecture by Maj Gen Jin Yi Nan https://www.youtube.com/watch?v=cYpj3OsoOSw
• 7. Kulacki, G. (2015). The Chinese Military Updates China’s Nuclear Strategy. Union of Concerned Scientists. Retrieved from https://www.ucsusa.org/sites/default/files/attach/2015/03/chinese-nuclear-strategy-full-report.pdf

East Asia India-China Relations, Nuclear Energy, Nuclear Security system/files/thumb_image/2015/nuclear-plant.jpg Creation of Defence Planning Committee: A Step towards Credible Defence Preparedness April 19, 2018 Laxman Kumar Behera

In a significant defence policy reform notified on April 18, 2018, the government has revamped the existing defence planning system by establishing a Defence Planning Committee (DPC) under the chairmanship of the National Security Adviser (NSA). This new institutional mechanism, set up as a permanent body, is intended to “facilitate a comprehensive and integrated planning for defence matters” – a vital ingredient in defence preparedness, which was conspicuously missing in the mechanism set up in the early 2000s in the wake of the Kargil conflict. The new measure, arguably the boldest defence reform in decades, is likely to have a far reaching consequence on the way defence planning is undertaken and on defence preparedness.

Salient Features of the New Mechanism

The heart of the new institutional mechanism is the all-powerful DPC with the NSA at the helm. The Committee has a cross-section of members drawn from the higher echelons of the civil and military services including the three service chiefs (one of whom is the Chief of Staff Committee, COSC), the Defence Secretary, Foreign Secretary, and Secretary (Expenditure) of the Ministry of Finance (MoF), with the chief of Headquarters Integrated Defence Staff (HQ IDS) performing the task of member secretary. Besides, the NSA is empowered to co-opt other members as and when required.

The charter of duties of the DPC is of two fold. One, it is tasked to ‘analyse and evaluate all relevant inputs relating to defence planning”, which includes, among others, the “national defence and security priorities, foreign policy imperatives, operational directives and associated requirements, relevant strategic and security-related doctrines, defence acquisition and infrastructure development plans, including the 15-year Long-Term Integrated Perspective Plan (LTIPP), defence technology and development of the Indian defence industry and global technological advancement.”

Second, the DPC is tasked to prepare at least five different sets of drafts including: “national security strategy, strategic defence review and doctrines; international defence engagement strategy; roadmap to build defence manufacturing eco-system; strategy to boost defence exports; and prioritised capability development plans for the armed forces over different time-frames in consonance with the overall priorities, strategies and likely resource flows.”

HQ IDS, which was established in October 2001 consequent to the decision of the Group of Ministers (GoM) based on the Kargil Review Committee (KRC) Report is to function as the Secretariat for the DPC, in addition to performing its usual secretariat function for the Chief of Staff Committee. In order to assist the functioning of the DPC, the new mechanism provides for four sub-committees, one each on Policy and Strategy, Plans and Capability Development, Defence Diplomacy, and Defence Manufacturing Eco-System. The reports of the DPC are to be submitted to the Defence Minister and further approval are to be taken as required.

Towards Credible Defence Preparedness

The formation of the DPC is likely to bridge a key gap in the existing defence planning mechanism, which, for long, was thought would be met through the creation of the post of Chief of Defence Staff (CDS) as the ultimate arbitrator of all requirements of the armed forces including the planning aspects. With the CDS not finding favour with successive political dispensations, the existing system of HQ IDS-led planning is perceived to have given way to the parochial interests of various stakeholders. This has had an adverse impact not only on how security threats were perceived by various security organs, but also on how scarce resources are distributed among the services and within the various branches of each service. Equally importantly, the existing planning process has had very little control on such aspects as true indigenisation and self-reliance in defence procurement matters, which are being vigorously pursued through the ‘Make in India’ programme.

Overall, the extant system of defence planning resulted in: the provision of less than adequate resources to meet numerous security challenges; chasing goals that were not of immediate priority; duplication and wastage of scarce resources; giving less than required focus on new technological advancements while pursuing manpower driven military modernisation; and, a defence R&D and manufacturing base losing its sight on self-reliance.

With the powerful DPC in place and the NSA assuming the role of de facto CDS for all practical purposes other than in operational matters, the defence planning process is expected to become more rational as well as provide a much needed boost to defence preparedness. The realistic enough expectation is that the DPC would clearly articulate the key national security/ defence/ military goals as well as prioritise defence and security requirements as per the likely available resources while at the same time providing adequate focus on emerging security challenges, technological advancements, and establishing a strong indigenous defence manufacturing base.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.

Defence Economics & Industry Defence Planning, Defence Production system/files/thumb_image/2015/india-flag_2.jpg Raksha Mantri to Pursue India’s Defence Cooperation Agenda in SCO April 16, 2018 P. Stobdan

Defence Minister Nirmala Sitharaman is scheduled to attend the Shanghai Cooperation Organisation’s Annual Defence Ministerial Meeting to be held in Beijing on April 24. This is the first time that an Indian Defence Minister will be attending such a meeting, which will have the participation of SCO’s Secretary-General and Director, Executive Committee of RATS. The meeting reviews pressing global and regional security matters, coordinates action plans, and issues a Joint Communiqué.

The meeting will certainly offer an opportunity to reset India-China ties especially after last year’s 73-day long standoff at Doklam. National Security Advisor Ajit Doval has just returned from Shanghai after meeting with the Chinese Politburo member Yang Jiechi on 13 April – both agreed to set ties on track in a comprehensive way.

The critical point is whether India is willing to join the SCO’s defence solidarity and coordination efforts defined under the “Shanghai Spirit”.

The agenda this year is to hold a Fanfare for Peace Military Tattoo inChinaand Peace Mission2018, the Joint Counter Terrorism Military Exercise inRussia. India was part of this decision taken early this year when an Indian military delegation led by Major General Ajay Seth participated for the first time in a meeting of the international military cooperation departments of the SCO since joining the bloc last year.

Importantly, India and Pakistan also joined an anti-cyber-terrorism drill in Xiamen organised by the SCO Regional Anti-Terrorist Structure (RATS) last December. It was designed to improve coordination in a scenario dealing with a terrorist group that had infiltrated into SCO countries. Apparently, PakistanandIndia expressed willingness to actively participate in defence and security cooperation within theSCOframework to contribute to regional security and stability.

The SCO’s common security threats were conceptualised as fighting against the “Three-evils”. Article 6 of RATS stipulates action by SCO Parties to deal with the three-evils including sharing of intelligence on extremist groups and individuals. RATS is based in Tashkent, and gathers information on terror networks, spread of ideology and propaganda, cross-border organised crime, and terrorist financing and money laundering. So far, it has seemingly curbed over 500 terrorist crimes, eliminated over 440 training bases; caught 1050 international terrorists. It maintains a list of terrorist outfits that are banned in the SCO space.

The focus this time is expected to be on anti-terrorism cooperation. Significantly, SCO adopted a draft convention last year on a single consolidated legal framework on terrorism, terrorist acts and terrorist organisations. The Astana Declaration last year expressed agreement to cooperate against individuals and legal entities related to the recruitment, training and employment of terrorists.

Importantly, the SCO holds the Annual “Peace Mission” or “anti-terrorist” drills, which focusonthe anti-terror command, coordination and combat readiness.Currently, Russian and Chinese are the common operating language for military exercises. Whether English will be added to improve interoperability (after the entry of India and Pakistan) is yet to be seen.

SCO also holds the military music festival "Trumpet of Peace” with military bands participating from member States.

The 2017 defence ministerial meeting decided to study and preserve the historical and cultural heritage. It also confers awards onpeople who contribute to strengthening better cooperation betweenthe organisation's defence ministries.

Defence Ministers normally use the SCO to highlight their respective security and strategic concerns. Examples include: Russia’s position on the Syrian conflict; and China’s position on the South China Sea issue, garnering support for its "One Belt, One Road" connectivity plan under SCO, etc.

So far, China is seen following an opportunistic but non-confrontational approach to using the SCO platform to create a favourable atmosphere for itself based on the idea of deepening strategic cooperation and mutual trust. The consensus-based decision under “Shanghai spirit” tends to serve Chinese interests mainly due to the strong bilateral economic ties it has with other member states. Notably, SCO is also about harmonising China’s policies with Russia’s regional agenda.

The SCO-Afghanistan Contact Group was revived last year (dead since 2009) in the context of Russia’s renewed interest in Afghanistan to counter the growing threat of ISIS, and China’s interest in playing a peace-building role and expand its BRI and CPEC projects into Afghanistan.

Central Asian defence policies (barring Uzbekistan and Turkmenistan) remain Russia-oriented owing to their militaries’ Soviet origins, but China has been subtly seeking influence in the regional defence and security areas under the aegis of SCO. Beijing has been hedging its own bets in Afghanistan by formulating a Quadrilateral Cooperation and Coordination Mechanism (QCCM) security grouping involving Afghanistan, Pakistan, and Tajikistan.

From India’s perspective, RATS is important for gaining information on extremist movements from SCO States to Syria, Iraq, Afghanistan, and Pakistan. It also collects information on the Taliban’s activities, but it is hard to imagine how all sides would share high value information mainly because of the closed nature of the various intelligence services and the mutual suspicion that generally exists between China and its Central Asian neighbours. It is even harder to imagine RATS sharing hard inputs on terrorist hideouts say in FATA region when Pakistan is also a member.

India has been maintaining security cooperation with Russia and the Central Asian Republics from the days of its support for the Northern Alliance in Afghanistan. India had set up a small field hospital at Farkhor in Tajikistan in 2001. In the post 9/11 era, India made a bold strategic move by undertaking renovation work of Ayni air base in Tajikistan in 2002.

The scale of India’s defence cooperation with the Central Asian states has expanded since then to cover areas ranging from military-to-military cooperation, training and assistance, joint military exercises, servicing and upgrading of military hardware, import of military equipment and spare parts.

The SCO has certainly emerged as the most important regional grouping in the Eurasian region. India joining the SCO has largely a symbolic meaning. As of now, there is lack of clarity about what it means for India in terms of any specific function and benefits. Yet, India cannot afford to be left behind in the strategic Eurasian region where only SCO has emerged as an important geopolitical pole. Therefore, logic demanded that India better be in than out of the SCO. But to be sure, multiple conflicting interests would intersect at the SCO forum, ranging from regional and global issues to combating terrorism.

Last year, Prime Minister Modi reposed full faith in the SCO as he fine-tuned India’s aspirations in the grouping to benefit in economics, connectivity and counter-terrorism cooperation, but he also drew certain redlines of “respect territorial integrity, unite againstterror”.

The SCO could become a new frontier for India, but the Pakistan factor could put a spanner in India’s goals. The SCO sees ISIS rather than Taliban as a serious threat to regional security. Moreover, Russia and China seemingly recognise Pakistan’s role in counter-terrorism. Clearly, India’s positions may beat odds there. Yet, it could be used as a neutral forum to discuss terrorism in a broader context as a leverage to obtain Beijing’s cooperation on curbing Pakistan-sponsored terrorism or at least not to unduly favour Pakistan. As it is, China’s concerns about the threat of terrorism are growing and, as the BRI moves ahead, Chinese nationals are getting exposed to a greater threat from terrorist groups.

Defence cooperation in the SCO ambit could possibly provide impetus for the Indian military and PLA to shed misgivings about each other besides providing both India and Pakistan a rare opportunity to share several multilateral tables such as the antiterrorism structure, military exercises etc., to work together incoordinating operational details and sharing intelligence, which might change the regional climate in the longer run. But, given existing deep differences, defence and security cooperation with Pakistan and China would remain challenging.

But mainly, India’s journey in the SCO would depend mostly on how India and China weigh ties on security and economic calculations. Of course, it will also depend on other factors, especially the future trajectory of Indo-US relations.

It would be wise on the part of India and Pakistan to maintain a low profile and not act as spoilers. They will have to respect the 38 parameters of the SCO, which, among other things, oblige member states to “avoid active military conflict” and strictly adhere “to maintain long-term Good-neighbourliness, Friendship and Cooperation”.

For India, the existing bilateral-level defence cooperation with individual states should provide further impetus for enlarging engagement in the SCO.

Significantly, the SCO had banned Pakistan-based terrorist group Lashkar-e-Taiba (LeT) as long as the July 2007 meeting in Bishkek. Even Pakistan had to put terrorist Hafiz Saeed-backed terror outfit 'Tehreek-e-Azaadi Jammu and Kashmir' on the list of "proscribed organisations" a day before it entered SCO as a full member in June 2017, although Islamabad cited its compliance with the Financial Action Task Force (FATF) for the ban.

For its part, India should get the chiefs of JeM (Masood Azhar) and Hizbul Mujahideen (Syed Salauddin) designated as “global terrorists” by the SCO.

Working closely with RATS would be extremely important to ensure that no undesirable elements inimical to India gain a footing in Central Asia. Importantly, India has raised its flag at SCO’s RATS Headquarters in Tashkent on June 15, 2017.

Finally, to increase awareness, visibility and the effectiveness of India’s role in the SCO, India should institute regular strategic and security dialogue and conferences to discuss issues of common interests and identify priority actions for stronger cooperation. In this regard, the foundation laid by the Ladakh International Centre (LIC) and the Institute for Defence Studies and Analyses (IDSA) through their various projects relating to India’s role in the SCO needs to be built upon.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.

Europe and Eurasia Shanghai Cooperation Organization (SCO), India system/files/thumb_image/2015/sco_4.jpg Defence Budget: Beyond the Numbers April 16, 2018 Amit Cowshish

As reported by the Times of India on April 04, this year’s discussion on the general budget in parliament will go down in history as the shortest since 2000 with both houses collectively spending just about one day on rushing through it. This puts paid to whatever expectation there might have been that the grave concern over the inadequacy of the defence budget expressed by the Standing Committee on Defence (SCoD) in one of its reports submitted to parliament on March 13 will receive the attention of the law makers and some political consensus will emerge on how to deal with this perennial problem.

Not that it would have made much of a difference. The standing committee has been highlighting this issue for the past several years without its being taken up for discussion in parliament or a solution being found. There have been a few odd questions on the defence budget in parliament in past years, but one cannot recall any member seeking a debate on the issue in either house.

The public discourse, such as it is, is replete with angst over inadequate defence spending. But it keeps skirting the periphery of this theme, with commentators focussing more on the need for increasing the defence outlay than on why things have come to such a sorry pass. References to the rising collusive threat from neighbours and emphasising that the armed forces need to be better prepared to face this threat, which requires substantially higher allocations, is stating the obvious. It does not help.

The discourse is largely fixated on issues like the falling percentage of the defence budget in relation to Gross Domestic Product (GDP), imbalance between the allocation for capital and revenue expenditure, committed liabilities gobbling up most of the capital acquisition budget, government’s procrastination on setting up a non-lapsable pool of funds for modernisation, and so on. None of this addresses the root cause of the problem.

The budget figures keep changing every year but this analytical narrative does not. A lot of intellectual capital is being continuously invested by the standing committee and defence commentators in elaborating on this narrative and in trying to convince no one in particular that more money is needed for defence. Nobody needs any convincing; not even the political class.

There is no evidence of a sharp difference of opinion between the politico-bureaucratic class and the armed forces on the issue of defence spending, as often projected. This is evident from the fact that the honourable members of the standing committee, cutting across party lines, have been repeatedly recommending a substantial hike in defence expenditure, preferably equalling three per cent of the Gross Domestic Product (GDP). But the defence budget continues to follow a flat trajectory.

This calls for some serious rethink on why the problem persists. Considering its resourcefulness, the standing committee is best placed to initiate a genuine debate on the issue but it generally rests content with passing strictures against the Ministry of Defence (MoD), delivering homilies and making inexplicit or impractical recommendations which only end up underlining the problem without offering viable solutions.

This pretty much sums up the essence of the four reports on the current year’s defence budget submitted by the committee to parliament on March 13. This is why it would have made little difference even if there had been a discussion on these reports in parliament as part of the general discussion on the union budget.

More specifically, it is unlikely that some way out would have been found through discussion in parliament to bridge the gap of Rs 1,32,286 crore between the requirement of funds projected by the armed forces and the allocation made in the union budget this year. This figure does not include the shortfall of approximately Rs 12,000 crore for other organisations such as the Coast Guard, Defence Research and Development Organisation and Ex-servicemen Health Scheme.

Merely exhorting the MoD, as the standing committee has been doing, to ask for more money from the Ministry of Finance (MoF) so that more funds could be allocated to the armed forces misses the point that the problem is not that the MoD does not ask for adequate funds. It actually aggregates the requirement projected by the armed forces and other organisations/departments and projects it to the MoF without imposing any cut. The actual problem is that it does not get what it asks for.

The crux of the problem, therefore, is the inability of the government to meet in full the requirement projected by the armed forces. However, the prevalent discourse sees this more as a case of the unwillingness, rather than inability, of the government to increase the defence budget. This takes away the focus from finding a viable solution to the real problem. Those who hold this view need to consider the fact that the overall defence budget has increased by 44.31 per cent in five years, going up from Rs 2,80,203 crore in 2014-15 to Rs 4,04,365 crore in 2018-19.

At any rate, it needs to be demonstrated that it is possible to provide more funds for defence without any large scale tinkering with the overall budget. This can be done with reference to the current year’s budget by establishing that it was possible for the finance minister to allocate another Rs 1,45,00 crore for defence over and above the Rs 4,04,365 crore (including Rs 1,08,853 crore for defence pensions) actually allocated, without any other major change in the union budget, such as reduced allocation for health, education, infrastructure development, poverty alleviation programmes, etc., with the primary objective of meeting MoD’s demand in full.

This exercise may be of no more than an academic interest at this stage but it will help in demonstrating the viability of increasing the defence budget without any other drastic changes in the fundamentals of the budget, or alternatively, dispelling the impression that inadequacy of the defence outlay is on account of politico-bureaucratic apathy to the needs of the armed forces.

To make the exercise of immediate relevance, it also needs to be demonstrated that even now the finance ministry can locate substantial savings from within the current year’s overall outlay of Rs 24,42,213 crore and make additional allocation for defence. This will establish the viability of the standing committee’s standard prescription that MoD should seek more funds from the finance ministry during the year which again overlooks the fact that MoD in fact asks for additional funds every year at the Revised Estimates (RE) stage but seldom gets what it asks for.

This new approach may be more helpful, if only in clearing the air about why successive finance ministers have found it difficult to increase the defence outlay substantially, rather than remain bogged down in questions like how much the defence budget works out to in terms of percentage of GDP. It is immaterial whether the defence budget is three per cent or one per cent of the GDP as long as the allocation matches, substantially if not fully, the projected requirement.

This challenge is not likely to be taken up because there is a reluctance to come to terms with the a priori knowledge that higher allocations are contingent upon a commensurate increase in the government’s receipts, which is not possible without broadening the tax base, raising tax rates, imposing more cesses, borrowing more money, and drastically reducing the non-productive expenditure of the government.

The problem is that there are serious statutory, socio-economic and political constraints in resorting to these measures beyond a certain limit. That is why the focus of the union budget has to be on how to boost economic growth and overcome the constraints that inhibit the expansion of the tax base and increase in tax revenue. A lasting solution to the budgetary constraints faced by the armed forces can only be found by resolving this tangle.

Meanwhile, it is unfair to ask the armed forces to prepare themselves for carrying out the responsibility cast upon them if adequate money cannot be made available. The objectives and resources have to be in sync with each other and if adequate resources cannot be provided the objectives have to be suitably recalibrated and alternative ways found to achieve them.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.

Defence Economics & Industry Defence Budget system/files/thumb_image/2015/india-eurasian_4_1.jpg Oli’s India visit: Resetting bilateral relations for mutual benefit April 11, 2018 Nihar R. Nayak

After a brief interlude of turbulent bilateral relations starting September 2015, a U-turn appears to have been effected in India-Nepal relations after the December 2017 elections in Nepal. Prime Minister Modi congratulated the top three political leaders of Nepal over telephone on December 21 for holding the elections successfully. Exactly a month later, he congratulated the UML chairman and then PM-in-waiting KP Sharma Oli over the UML-led left alliance attaining a majority in Parliament and offered India’s unconditional support for and commitment to work with the new government in Kathmandu. As part of confidence building measures, on February 1, Modi sent External Affairs Minister Sushma Swaraj as special envoy to discuss bilateral relations with the left alliance leaders, and especially with Oli. Media reports indicated that the Swaraj visit took place upon a special request from Oli to Modi. During that visit, Swaraj conveyed Modi’s message and also invited Oli to undertake an official visit to New Delhi after assuming office.

Visit outcomes

The U-turn culminated in Prime Minister Oli’s three-day official visit to New Delhi starting April 6. The visit is widely rated as most successful and historical. In contrast to Oli’s previous visit in February 2016, as well as to the visits made by Prachanda and Deuba in September 2016 and August 2017, respectively, the current visit of Oli has been characterised as remarkably different. First, Oli was received at the airport by Union Home Minister Rajnath Singh, who is second in rank in the Modi cabinet. Second, not only was Oli’s first foreign visit to India but even his first official meeting as PM took place with Indian business leaders on which occasion he invited Indian investors to Nepal. Third, the two leaders held a one-on-one meeting for over one hour at Modi’s residence before the delegation level meeting. Such one-on-one meetings rarely happen during visits of high level delegations to India. Fourth, other than the 12-point regular joint statement, three special statements on agriculture, rail linkages up to Kathmandu, and inland waterways, were issued during the visit. Fifth, for the first time in the last three years, the joint statement did not mention internal issues of Nepal such as amendments to the new constitution, inclusion of minorities, Madhesi, etc. Last, but not the least, both leaders found synchronization between their favourite development frameworks - ‘Sabka Sath Sabka Bikas’ and ‘Samriddha Nepal Sukhi Nepali’.

Purpose of the visit

The principal purpose of the visit was to remove the mistrust that had emerged in bilateral relations in the wake of Nepal’s adoption of the new constitution and India’s reservations about some of its provisions. The relationship had reached a new low when Nepal unilaterally recalled its ambassador and cancelled its President’s India visit in May 2016. A thaw emerged only after the completion of the Parliamentary elections in December 2017. While addressing Nepal’s Parliament before his three-day India visit, Oli said that “the visit is aimed at deepening the relations that have subsisted between Nepal and India since ages.” From the Nepali point of view, the other purposes of the visit could have been to seek India’s support for economic development, move forward on the implementation of past agreements and ensure a mutually cooperative relationship. Nepal also wanted to re-frame its bilateral relationship with India in the context of recent domestic and regional developments.

Mutual feeling to mend relations

For its part, India too undertook unilateral steps towards course-correction. This, despite all those internal issues in Nepal that had created the rift in bilateral relations, remaining unaddressed. There could be many reasons for India’s course correction. First, since India values democracy, Modi personally felt that the public mandate in favour of the UML-led left alliance needs to be respected and that India should support institution building in Nepal under a popular government. Second, this realization in New Delhi may have also been occasioned by changes at the bureaucratic level — those officials who dealt with Nepal affairs ever since the constitutional promulgation process had left their desks in the foreign office and agencies from March 2017 onwards. It is possible that new officials posted in key positions and tasked with following Nepal perhaps started looking at the bilateral relationship from a different perspective. Third, domestically, Modi came under tremendous pressure to improve relations with neighbouring countries and especially with Nepal with which India shares a multi-layered relationship. The Indian media was particularly critical of Modi’s Nepal policy in the post-constitution period. Fourth, the more than 70 per cent voter turnout and the active participation of Madhesis and Janajatis in Nepal’s three level elections – local, provincial and federal – under the new constitution forced India to revisit its earlier position, shed reservations on the constitution and modify policy towards Nepal.

Even as India reached out to the new government in Kathmandu, the Oli government had its own reasons to respond positively to the Indian overtures. First, it needed massive developmental assistance to fulfil its poll promises like roads, rural electrification, drinking water, irrigation, jobs, hospitals, industrial zones, railways and airports. Despite China’s increasing economic cooperation with Nepal, India continues to remain Nepal’s largest trading and business partner. Further, India is the only transit country for Nepal’s third country trade despite having signed a transit agreement with China in March 2016. Second, the Oli government also realized the requirement for massive funds to implement federalism through the creation of the necessary administrative infrastructure in the provincial capitals. Since China opposed federalism in Nepal, the Oli government was not sure about receiving Chinese financial support for that purpose. Therefore, it decided to explore the prospects for India’s support in this regard. And third, politically, Oli might have felt that rapprochement with India could prevent the formation of a non-UML government in Kathmandu given the slow progress in unification of the two left parties and intra-party factionalism in the UML. If such a situation were to unfold, Oli could seek the support of the Terai based parties to remain in power.

Trilateral cooperation

Therefore, despite winning the elections on a nationalist plank by projecting India as an interfering neighbour, Oli chose New Delhi as his first port of call. He was well aware of India’s obsession about every new Nepali PM undertaking the first official visit to India. He could undertake the visit with confidence without being apprehensive of its fall-out on Nepal’s relationship with China because the latter, in a statement issued in March 2018, appreciated Nepal’s effort towards adopting an independent foreign policy and “developing friendly and positive relations with its neighbours." Earlier, China had also advised Nepal to maintain good relations with India. Chinese analysts argue that such a rapprochement between New Delhi and Kathmandu could create the ground for trilateral cooperation and successful implementation of BRI projects in the Himalayas.

Challenges

No doubt, the purposes of the visit have been achieved and a new phase of relationship has begun with India acknowledging Nepal as an ‘equal partner’. While the visit has set a new tone in the relationship, it has also brought fresh challenges to the fore in terms of each country addressing the other’s concerns. Certainly, the challenges are more for India than they are for Nepal. There is a trust deficit in Nepal because of the Indian reputation for delaying implementation of various projects. This has sent a wrong message in Nepal that the delays are deliberate. After Oli’s latest visit, which has created new expectations in Nepal, India needs to seriously address this problem of delivery-lag.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.

South Asia India-Nepal Relations, Nepal, India system/files/thumb_image/2015/indo-nepal_0.jpg Will North Korea Denuclearise? April 09, 2018 Ashok Sajjanhar

The short and simple answer to the question ‘’Will North Korea Denuclearise?’’ is ‘’Unlikely.’’ This, notwithstanding the assertions that the North Korean leader Kim Jong Un appears to have made in recent weeks about his readiness to do so. The statements attributed to him in this regard are most likely the proverbial carrot that he is dangling in front of his adversaries, particularly the United States, to engage with him seriously and thus enable him to realise his core objectives.

Kim Jong-Un’s statements indicating readiness to denuclearise have capped the frenetic activity that the world has witnessed over the last more than three months. The fast-paced drama, laced with deft and sophisticated diplomatic moves, has been directed and choreographed by none other than Kim Jong Un himself.

It all started with Kim Jong Un’s New Year speech wherein, on the one hand, he declared that he had the whole of the United States covered by his nuclear missiles, and, on the other, expressed his willingness to engage in a dialogue with South Korea and for that purpose send a team to participate in the Winter Olympic Games in Pyeongchang, South Korea, starting 8 February. The olive branch was seized with alacrity by the South Korean President even as the US President blustered that he had a bigger and better nuclear button on his table.

At the opening of the Winter Olympics in Pyeongchang, the North Korean contingent marched together with its South Korean counterpart. The occasion also witnessed the historic hand-shake between South Korean President Moon Jae In with the nominal head of State of North Korea Kim Yong Nam and the younger sister of the North Korean supremo Kim Yo Jong. If contacts between the two Koreas had been limited only to North’s participation in the games, it would not have amounted to much because the two Korean teams have marched together nine times in recent years during opening ceremonies.

North Korea’s participation in the Winter Olympics was quickly followed by the visit of a South Korean delegation led by National Security Adviser Chung Eui-yong and intelligence chief Suh Hoon to Pyongyang on 5 March to explore the possibility of talks. They met Kim who apparently indicated his readiness to denuclearise if the safety and security of his regime were guaranteed. Kim also expressed readiness to hold direct, candid talks with USA and South Korea, and indicated that no fresh missile or nuclear tests will take place until talks are in progress. According to the South Korean team, “the North Korean side clearly showed willingness on denuclearisation in the Korean peninsula if military threats to North Korea decrease and regime safety is guaranteed.” This was not explicitly confirmed by North Korea, which only said that satisfactory progress had been registered in the talks. An April summit between the two Korean leaders was announced, and is now scheduled for April 27 at the Peace House in Panmunjom.

Thereafter, the two South Korean officials travelled to Washington DC to brief President Trump on their discussions. And the latter readily agreed to a direct meeting with the North Korean leader, which is likely to take place in May 2018.

This denouement was quickly followed by an unanticipated four-day visit by the North Korean leader to Beijing towards the end of March. This was Kim’s first visit outside the country since assuming office in 2011 and also his first meeting with President Xi Jinping. Although it was billed as an unofficial visit, it had all the frills and accompaniments of a State visit with a banquet hosted by President Xi and a guard of honour thrown in for good measure. Reports carried by the Chinese News Agency Xinhua and the Korean Central News Agency on the outcome of the visit are somewhat at variance with each other. For instance, Xinhua reported that, according to Kim, “the issue of denuclearisation can be resolved if the US and South Korea respond to our efforts with goodwill and create an atmosphere of peace and stability while taking progressive and synchronous measures for the realisation of peace.” The KCNA report did not contain any reference to “denuclearisation” and said: “The supreme leaders of the two countries exchanged in-depth opinions on significant agendas, including the development of amicable relations between DPRK and China and the issue of managing the Korean peninsula.” KCNA added that Kim’s visit “became a crucial opportunity to expand and develop the friendly relationship between DPRK and China to a new and higher level.”

Current Position

Developments over the last three months have helped to raise the prestige and profile of the North Korean leader immeasurably. He has led developments on this issue from the front and with sure and deft moves brought them to a position where he appears to be holding all the major cards in his hands. This is a far cry from the situation that prevailed in December 2017 when he had appeared to be completely isolated in the world.

It is reported that the visit to Beijing was made at Kim’s initiative. He appears to have travelled with the confidence that he had achieved most of his objectives by conducting four nuclear tests since coming to power in 2011 (as against the two tests conducted in 2006 and 2009), and by carrying out more than 80 missile tests including the one of Hwasong 15 in November 2017 with a range of around 13,000 kms (as against 16 missile tests in total conducted in previous years). He has thus established North Korea’s credentials as a de facto nuclear weapons power with an arsenal that can hit all parts of USA.

During the last six years, relations between North Korea and China had become increasingly stressed and strained. Kim would thus have considered it an ideal opportunity to mend fences with China and use its considerable support to drive an advantageous bargain for him. Rapprochement between China and North Korea suits China also very well as it helps it to re-establish its pre-eminent position in dealing with the Korean nuclear crisis. China had to face considerable embarrassment when North Korea had conducted its missile tests during the Belt Road Forum in Beijing in May 2017 as well as just before the BRICS Summit in Xiamen on 4 September 2017. A successful visit by Kim has enabled China to emerge as the key and most influential player in dealing with this vexed issue. The visit has enabled Kim to emerge as a more confident and stronger player than he was earlier.

South Korean President Moon has been most uncomfortable with the menacing and intimidating war of words between Kim and Trump over the last one year. South Korea would not like a conflict on the Peninsula under any circ*mstances. In this, Moon differs widely from President Trump’s approach to the issue. Kim has successfully exploited this difference in approach between Moon and Trump to reach out to Moon and drive a wedge between him and Trump. Kim however also realizes that the safety and security of his regime can be guaranteed only by USA. It is hence necessary for him to engage with Trump. USA would also not like North and South Korea to cut a deal between themselves on the side as it considers itself vulnerable to the nuclear and missile capabilities of North Korea.

Japan finds itself left out from all the hectic parleys. It also faces an existential threat from North Korea and hence would like to have a say in whatever discussions are held to resolve the issue. Japan has been on the same page as the US and taken a hard, tough stand against North Korea. It is wary of adopting a soft approach as South Korea is doing. Abe will hence be travelling to Washington later this month to coordinate his position with the stand that Trump is likely to take in his meeting with Kim next month.

The exact date and venue of the meeting between Kim and Trump is not clear. It is considered that hectic back-channel parleys to decide on these issues are going on between USA and North Korea. Kim has suggested Pyongyang. That is unlikely to be accepted. Beijing has also been mentioned. Americans are unlikely to agree to that venue as well in view of the tense relations between the two countries at the moment. It is unlikely that Kim will agree to travel to any Western capital for the meeting. Some likely venues are Mongolia or a Central Asian country, possibly Uzbekistan. The coming weeks are likely to bring clarity to the issue of venue and dates.

Conclusion

It is highly unlikely and even impossible for North Korea to agree to a complete denuclearisation. In fact, in its talks with South Korea and USA, it is likely to put up front its demands for lifting of sanctions, removal of the 28,000 US troops on South Korean soil, complete cessation of war exercises and games, and removal of THAAD missiles from South Korean territory. In making these demands, North Korea would have the tacit approval and support of China as well as Russia. It would be quite inconceivable for USA/South Korea to agree to any of these demands. It is hence highly unlikely that discussions between Trump and Kim will be able to register any significant headway. The presence of the hawkish John Bolton, the new US National Security Advisor, and the equally hawkish Mike Pompeo, the new Secretary of State, on the Trump team will further reduce the possibility of a significant breakthrough.

Having seen the treatment meted out to Libyan leader Muammar Gaddafi after he surrendered his nuclear arms, it is unthinkable that Kim Jong Un will ever seriously contemplate giving up his nuclear weapons. He will try to drive the hardest bargain possible and be willing to make only small concessions like maintaining some type of a freeze on future tests of missiles and nuclear weapons. In return, he will demand the removal of sanctions as well as fool proof guarantees for his regime’s security and recognition of his country by USA and other western powers.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.

East Asia North Korea, Nuclear system/files/thumb_image/2015/nuclear_0_0.jpg