With the 2014 general election staring us in the face, the Finance Minister, Mr. P Chidambaram, presented a budget that resembles a financial bulwark for the masses – but where defence, like others, has been a casualty in the bargain. India had always been an important export destination for weaponry and defence equipment, areas which were monopolized by USSR during the greater part of the Cold War. Even after many entry barriers were removed allowing Western nations to penetrate the Indian defence market, the lion’s share of the defence pie continued to be controlled by Russia – a trend that is still as much in vogue as it was yesteryear!

And this budget gave India all the more reason to continue the said trend – a glimpse of which is displayed every year during our Republic Day celebrations where our government showcases the country’s military might as tableaus in front of the entire nation. This year, most of the defence weapons displayed were either imported or were assembled using the parts imported from countries across the world. In short, our tableaux were in fact a virtual display of Russian or Israeli military power!

A defence budget of Rs 2.03 lac crore is certainly good news for India but not good enough for it to rejoice because the procurement model itself is fraught with enormous opportunity costs. Plus, the factor of corruption that is being uncovered every now and then in various deals adds to its limitations. General V. K. Singh’s deliberations can be only the tip of the iceberg as there can be more than a few skeletons in the closet. The beginning of the long line of defence scams started with the Bofors scam in 1987 that involved an alleged kickback of Rs.64 crores – an astronomical figure in those days – for the purchase of the Swedish 155mm howitzers. The Barak missile scam in 2006 that had a deal amount of $169 million was tainted by the accusation that the government went ahead with it despite opposition from the DRDO. The coffin scam in 1999 was another blot with cases filed against army personnel and American contractors. And finally, the much publicized Tatra truck scam in 2012 where a kickback of Rs.14 crore was offered – as claimed by Gen V.K. Singh – and subsequently rejected.  Read More....

An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).

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