Will India's Tanking Economy And Drought Delay Defense Procurement?

Several of India’s big ticket defense acquisition programs could be delayed as the country battles drought coupled with the slowest economic growth in years and high inflation. With wide-spread drought reported all over the country, several states such as Gujarat, Rajasthan, Punjab, Karnataka and Maharashtra among others are in line to receive a $2 billion federal relief package. India's Ministry of Defense (MoD) has been allotted $74.5 billion to spend on weapons acquisition and modernization of all three services for the fiscal year 2012-2013. The money is to be spent this fiscal but could be held up if the government does not clear the purchases. While the Indian government is keen to step up defense modernization, it faces a severe strain on resources which could lead to delays or reviews of certain big-ticket acquisition programs. With a new finance minister, P Chidambaram, at the helm India’s focus over the coming years will be to aggressively rebuild the economy, revive the stock market, restart stalled economic reforms, disinvest in government owned companies and restore investor confidence. Chidambaram, who is widely rumored to have been brought into the Finance Ministry going by his previous track record where the economy grew by around 8 per cent per year, has initiated a mid-year course correction program to counteract poverty, inflation and boost industrial and agricultural production. Although India is now the world’s largest arms buyer, several major acquisitions have been delayed since the beginning of this year. The purchase of the INS Vikramaditya, a Russian aircraft carrier formerly known as Admiral Gorshkov, has been delayed since its purchase in 2005, possibly owing to a pricing dispute. India’s acquirement of 197 light attack helicopters have also been delayed several times since 2008, the MoD attributed this holdup to the Air Force’s indecisiveness. The multi-billion dollar MMRCA (Medium Multi-Role Combat Aircraft)deal is currently under commercial negotiations with France's aircraft-maker Dassault with no word on whether it could go through during the current fiscal. Among the major deals approved this year was the acquisition of howitzers from BAE systems in a $145 million and a deal with the Swiss firm Pilatus for the purchase of trainer aircraft. It does not look probable that these deals will be concluded this fiscal. Among the prominent deals being delayed is one to develop future infantry combat vehicles, worth upwards of US$12 billion and several to purchase various helicopter types. By Bindiya Thomas