"India Defence & Security Report Q4 2013" Now Available at Fast Market Research

Boston, MA -- (SBWire) -- 10/03/2013 --India's defence establishment received some welcome news in the first half of 2013 when the Finance Ministry made a U-turn on defence spending cuts, agreeing to trim the budget only slightly, rather than inflict deep cuts as initially planned. Nonetheless, funding is going to remain flat for the next couple of years, which is problematic enough for a military desperate to move ahead with a range of overdue procurement programmes.

The scale of the challenge facing Indian defence was highlighted in June when the Army gave the MoD a list of top-priority items it now requires urgently - it ran to 700 items valued at around U$35bn. The Ministry of Defence is attempting to expedite some long-delayed programmes, such as the acquisition of new artillery, but there is a sense that the Indian military may never get on top of its extensive wish-list.

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However, flooding in Uttarkhand state in June - a disaster that claimed an estimated 6,000 lives - may hasten the procurement of additional heavy-lift helicopters and fixed-wing aircraft. The military was heavily involved in the rescue operation and by all accounts performed well, but there was an acceptance that greater numbers of modern aircraft would have helped the IAF and the Army to accomplish their hazardous rescue missions. The big-ticket procurement of Rafale fighter jets from French supplier Dassault also remains stalled over Indian demands that Dassault assume full responsibility for the quality of all 126 jets ordered for the IAF - even though the majority of the aircraft will be assembled locally by Hindustan Aeronautics Limited, as stipulated by the MoD's procurement terms. The deal is now unlikely to be finalised until late 2013, and there is a risk that the contract could unravel entirely.

Large-scale investments in foreign defence equipment will continue to be made. Yet there are two sides to the Indian defence story. On the one hand, India remains the world's largest importer of weaponry, and is moving ahead with the procurement of some highly advanced systems. On the other hand, structural weaknesses within the Indian defence bureaucracy mean that procurement programmes remain prone to lengthy delays and overspending, while the local defence industry continues to underperform.

Relations with China have improved after Chinese Premier Li Keqiang visited India in May, and Indian Defence Minister A.K. Antony went to China in June. Discussions are now under way about establishing a new Border Defence Co-operation Agreement to protect against unintended conflict along the disputed border. However, India claimed that Chinese forces had again crossed the border into Indian territory just weeks after Antony's visit, underlining that this will be a difficult issue to resolve.

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