Saturday, February 25, 2012

Rafale deal reveals India’s political and strategic priorities

In August 2007, India began a tender process to acquire 126 medium-range, multi-role jet fighters to replace its ageing Mirage fleet.

In late January, the Indian government announced it had chosen the French consortium-led Dassault Rafale over the UK–German consortium-led Eurofighter Typhoon as the preferred bidder in the tender process. India’s decision to select the Rafale over the Typhoon was met with disbelief in the UK and Germany — and triumphalism in France. Beyond dividing European neighbours, the Indian government’s decision also provides a sharp insight into the country’s current political situation and its strategic priorities.

The contract for the fighters is estimated to be worth US$10.6 billion. Given the economic conditions across Europe, and particularly in the UK, securing the contract was seen as a national priority. The UK’s economy remains largely stagnant with growth of only 0.9 per cent in 2011, while unemployment increased to 8.4 per cent.

And in the final quarter of 2011, national GDP contracted by 0.2 per cent and manufacturing declined by 0.9 per cent. Moreover, the Conservative government has pledged to dramatically reduce defence spending, with severe impacts on the local defence industry. In 2011, the government ended development and production of the Nimrod reconnaissance aircraft and retired the Harrier fleet. Final assembly of the Typhoon takes place in the UK and over a third of the parts are sourced within the UK. So obtaining a contract to export the Typhoon to India would have provided a significant boost to the national economy, particularly in the hard-hit manufacturing and defence sectors.

The deal to produce the fighters also has significant political ramifications. In 2010, David Cameron led a highly publicised government and business delegation to India, and has often cited increased trade with India as a means of reinvigorating the national economy. In France, current polls predict defeat for President Sarkozy in the April presidential election after a downgrade in the country’s credit ratings, sluggish economic growth and persistently high unemployment. And in India, the national government — led by Manmohan Singh — has been embroiled in significant corruption scandals, including the sale of government telecommunications licences and procurement contracts related to the hosting of the 2010 Commonwealth Games.
It was this final consideration which appears to have determined the tender in favour of the Rafale. Throughout the bidding process, India’s Ministry of Defence emphasised that price would be the most important factor in its decision.

Immediately after the January announcement, it was widely reported that Dassault was preferred because it was the lowest bidder for the contract. Jane’s reported that the Rafale was quoted to be 15–17 per cent cheaper than the Typhoon, with the individual unit cost US$5 million less for the Rafale. While the Eurofighter consortium believes the Typhoon is the superior aircraft, the two fighters’ combat performance was deemed to be equivalent, with the Rafale having performed particularly well in the ground-attack role during NATO’s offensive in Libya.

Additionally, the Rafale would include complete and advanced radar and avionics capability. On balance, the decision appears to be on the merits of the tenders rather than any corrupt interference.

The decision to purchase the Rafale also provides insight into India’s strategic priorities. In April 2011, the Ministry of Defence rejected bids from US firms Lockheed and Boeing, which offered the F-16 Fighting Falcon and F/A-18 Hornet, respectively. The rejection was consistent with the Indian government’s refusal to sign arms-transfer agreements with the US, which meant recent aircraft sales have been made without avionics equipment, vital to fighter jet operations. The decision to choose the Rafale also follows a 2011 agreement with France to upgrade its remaining Mirage fighters and purchase French manufactured air-to-air missiles, and a 2005 order of six French-built Scorpene submarines. Together, these agreements have made France the second-largest supplier of defence materiel to India. Outside of military relations, the deal furthers the increasing bilateral ties between India and France. In 2008 the two countries agreed to a major nuclear deal whereby France accepted to enter into nuclear-energy collaboration with India and provide access to technologies and fuel. In the same year, the two leaders held bilateral visits, with a goal to double bilateral trade between 2010 and 2012.

India’s decision to choose the Rafale over the Typhoon surprised and disappointed many in the UK, but appears to have been made on the merits of each tender. Moreover, the decision to preference a French bid is consistent with India’s history of non-alignment and a strengthening bilateral relationship between the two countries.

By James Boyers completed an Honours degree, majoring in political science, at the Australian National University in 2011. He is currently interning with a public-affairs organisation in London. East Asia Forum

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