Good Morning. The recent Tejas crash in Dubai has reminded us how bureaucracy has delayed, if not dismantled, our hopes of strong homegrown defence equipment. While the wars have moved on to drones, India still needs to have a strategic view of defence equipment and its manufacturing, for a secure future.

In other news, auto sales have got a leg up during the festive months, after dull sales through the financial year. Most auto companies now hope that the fervour for cars will hold for the rest of the year. Meanwhile, India is making progress on a free trade agreement with Israel and is looking to hasten it to benefit traders.

THE TAKE

Dubai Tejas Crash: Spotlight Back On Defence Privatisation

By Govindraj Ethiraj

I asked a former head of the Indian Space Research Organisation (ISRO) why, all other things constant, India’s space programme has much to show and boast of as compared to our efforts in defence, which has, to put it most mildly, struggled in comparison.

His answer was a smile and a question in return, which I could paraphrase as, “Why do you think so?”

Whether it was bureaucrats or bureaucracy, the answer was in many ways self-evident.

India’s Aircraft Story

Everything has context. ISRO was created by Vikram Sarabhai, a gifted physicist who hailed from a successful business family.

India’s first aircraft manufacturing firm, Hindustan Aircraft, as it was then called, was also set up by a businessman, Seth Walchand Hirachand, in December 1940, as a partnership with the princely state of Mysore.

However, in 1942, it was taken over by the government, which took full administrative control in 1951. The company made aircraft for the Indian Air Force, as it does now.

ISRO was always an arm of the government but functioned then and now, more autonomously. 

Which brings us to the present.

The Dubai Debacle

Last week, a Hindustan Aeronautics Limited (HAL)-manufactured light combat aircraft (LCA) Tejas crashed at the Dubai air show. The Dubai show, incidentally, is considered the third largest after Paris and the UK’s Farnborough. 

The reasons for the crash, which saw the unfortunate demise of an Indian Air Force (IAF) pilot, are not fully clear as of now. What is clear is that the fighter jet, which was also on display for export orders, is not likely to see a rush for them, at least for a while.

The LCA Tejas programme highlights once again what India has lost by not privatising its defence sector sooner. Or, conversely, by not letting Hindustan Aircraft continue as it was set up.

This is, of course, perfect hindsight. 

But the long-term damage of weak leadership in our defence production and the strategic approach to it is hurting us.

The Tejas programme began in the 1980s as India tried to replace the vintage Soviet-origin MiG-21s — the last of which retired as recently as September.

The government-owned HAL has 180 of the advanced Mk-1A variant on order domestically but is yet to begin deliveries due to engine supply chain issues at GE Aerospace, a report in Reuters summed up. 

LCA Tejas is described by HAL as a 4.5 generation, all-weather and multi-role fighter capable of offensive air support, close combat and ground attack roles apart from ground maritime operations.

However, it seems that the aircraft has not actually participated in any of these situations in a combat environment, which would stress test the capabilities of man and machine.

Lost In Procrastination

Shekhar Gupta, Editor of The Print, wrote in his column over the weekend that the project has been caught in a seven-decade technology race.

The project was cleared in 1983. It took 18 years to take its first flight, having been named Tejas by former Prime Minister Atal Bihari Vajpayee. It took another 15 years for initial operational clearance, and another four for full operational clearance. 

The story continues, he writes.

The unfortunate part of this story is that we have tried to import substitute in an area where we could have done better by importing the best in the world.

Remember, your enemy does not award you brownie points for turning up in a homegrown product. And while importing defence equipment of any kind is fraught with political risk, that is not a reason to not do it.

Drones To Our Defence 

Defence analysts, of which there are many, are better qualified to go into why we don’t have state-of-the-art fighter jets or equipment. But, the Dubai crash only highlighted the need to speed up and, or, let go.

To be fair, India has now increasingly brought in private sector participation into defence, particularly in recent years.

Many private drone companies are now supplying to India’s armed forces. 

Though the use of drones in warfare is something that no one could have predicted. Least of all the many Indian drone companies that started out building for applications like surveillance, mapping and agriculture.

But it does feel like there is a long way to go before catching up in terms of cutting-edge defence or fighter jet technology. 

Unless the parameters of war change completely, and we leapfrog by default rather than by design.

And that too is happening.

The Hindustan Aeronautics website defines the LCA Tejas as dimensionally smallest, with an excellent flight safety record and a remarkable achievement of accident free flying.

The website may or may not get updated, post Dubai, but hopefully our approach to defence, in the literal sense, will.

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CORE NUMBER

Rs 1.28 lakh crore

That’s how much market capitalisation seven of India’s top-10 most valuable companies gained last week. There was a broader upswing in the equity markets, as the benchmark index Sensex gained over 669 points during the week.

This is how much market cap they gained:

Bajaj Finance, ICICI Bank and LIC saw an erosion in market value during the week, for a variety of reasons, including guidance cuts.

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FROM THE PERIPHERY

Tata Motors Sees Strong PV Demand

Domestic passenger vehicle (PV) sales could grow in double digits in the second half of this fiscal, said Shailesh Chandra, MD and CEO of Tata Motors PV, in an analyst call. He added that the pent-up demand for PVs could remain robust even beyond the festival season, and sees sales growth of around 5% for the entire fiscal year.

By The Numbers: The first half of the fiscal year saw dull sales, as sales growth softened to 1.6% the April-September period. The festive months saw a rebound, with 5% growth in September and 17% growth in October, Chandra said.

The Backstory: The boost came after the government announced sharp cuts in goods and services (GST) that added punch to festive sales. A few pundits have been theorising that the sales spike could be short-lived, but executives believe that the momentum would carry on through the fiscal.

India-Israel FTA In The Works

India and Israel are looking to implement their free trade agreement (FTA) in two phases. Both the ministers are keen to finalise the first phase early to benefit traders, said Commerce and Industry Minister Piyush Goyal. He is in Israel leading a 60-member delegation.

Setup: Both countries inked terms of reference (ToR) to formally launch negotiations for the agreement. The ToR aims to eliminate tariff and non-tariff barriers, facilitate investments, simplify customs procedures, and ease norms to promote trade in services. It also aims to increase co-operation for innovation and technology transfer.

Context: Both ministers are focusing on low-hanging fruit in the FTA, and decided not to touch sensitive issues on both sides. Even though India is Israel’s second-largest trading partner in Asia, its exports to the Middle Eastern country dipped 52% in FY25, and imports too fell by 26%.

FMCG Cos Hold Off Price Hikes

Fast moving consumer goods (FMCG) companies are holding back routine price rises, despite a rise in raw-material costs across several categories, The Economic Times reported. This comes after warnings by the government to companies not to profiteer and pass on the benefits of GST cuts to customers.

Outcome: It’s a double whammy for companies as the cost of imported components are going up due to rupee depreciation. The rupee crossed the 89/dollar mark on Friday. Routine price hikes are taken up by companies to pass on rising costs, which have become difficult to execute across soaps, biscuits, detergents, automobiles and electronics.

Future: The executives of some of the companies are planning to approach the government and the GST authorities via industry bodies for clarity on pricing. Most of them are absorbing the costs as of now.

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