 If we look at, I mean, in order to appreciate what has been allocated in defence, there is another way of looking at it if we take a look at defence exhibition that was held in Lucknow. The more remarkable thing about the defence exhibition was the fact that we have projected ourselves as one of the emerging military defence exporters in the world. We have announced and there are grandiose plans, but if you look carefully at some of the things that have been talked about Raghu, it leaves you feeling very unsettled. For instance, the Prime Minister, the Defence Minister, everybody spoke eloquently about how our defence exports increased from Rs. 2,000 to Rs. 2,000 crores to Rs. 10,700 crores. And in fact, if I remember correctly, the Prime Minister used the figure 17,000 crores which was highly exaggerated. I think he mistook the zero, he removed the zero and just read the 17 as 17,000 crores. Anyway, the reality is, if you look closely, that most of that amount that they are talking about, I mean, Rs. 2,000 crores is actually military exports. The rest is civilian aerospace parts and components which were exported. So, we come back to an issue that we have touched upon earlier, but I find that it's still relevant to talk about it because it deals with offsets. And the way in which offsets have actually been hollowed out. So, Raghu, the question is, how do you make civil aerospace components exports part of military exports? It's not correct at all. It's just not right. It starts because the offsets of defence contracts, because the numbers are small and the foreign equipment manufacturer finds it difficult to incorporate transfer of technology or sub-assemblies, manufacturing in India for a small number of aircraft. Therefore, it says, okay, I will get some civilian components made in order to... Like does all that with Falcon executive jet. Or like Boeing does with anything else. So, they deliberately, in order to satisfy the offset requirements, get some civilian parts made. Okay, that's a kind of a twisting of the offset rules. Although it should be done only in exceptional cases, we are now routinising this process, which I think shouldn't be done. This is not what offset was all about. Exactly. The purpose of offset was that it enables you to indigenise the production of the technology which you are buying outright today. But all that works only if your purchases are of scale and you have identified strategically defined partnerships which can then absorb that technology and do it. So, by compulsion, offsets are being diverted for various other uses. But then, to further distort that by claiming in exports that these are military exports is I think fraudulent. But I think the second notable fact in the def expo that you were talking about is bulk of the equipment displayed there, which India is showcasing to the world, are made by public defence sector undertakings, PDSUs. This whole narrative that is now being done of promoting the Indian private sector, I think the hollowness of that narrative was exposed in def expo by the fact that all the major weapons platforms that you are displaying and demonstrating there are done by the public sector undertakings. Except the media report of that would tend to project the private corporations entry into defence as a major feat. It is not a major feat because bulk of these are related to missile technologies where Israeli companies or something are doing assemblies here. It is not really manufacture, it is assemblies here for export. And for Israel it makes sense because Israel after all, although it is technologically very strong, it is a small country. So, it is difficult to expand their manufacturing base very much. So, they do not mind expanding manufacturing base into India and re-exporting from here. But the interesting thing about the private corporations is there are a number of agreement joint ventures that have been signed for small arms and for drones. And number of private corporations are entering this field. That is one part of the problem because we are going to soon have a glut and not enough buyers domestically and will be faced with. Now this issue is confronting Larsen and Toubro, one of the largest private corporations in the defence sector. They have warned Government of India that that Vajranine, how it is that they have manufactured with South Korean company in a joint venture that very soon in six months time they are going to run out of orders. And unless Government of India gives them another order, they may have to close shop and move their skilled staff somewhere else. So, that raises a question. I mean this is going to be a recurring problem. What has happened is that the Ministry of Defence officials have been telling now the private corporations that look, your share of the pie is going to be small and don't count on repeat orders. You have to create, you have to look for exports. Now my question to you Raghu is that if you create a private, I mean you allow private sector to entry, their major demand is that there must be a repeat orders otherwise the companies cannot make do. If you are asking them to export and create a market, how realistic is this way of creating an indigenous defence sector in India? Completely unrealistic because all private, for two reasons, all private companies are making a beginning in domestic manufacture by collaboration with a foreign OEM. So unless the foreign OEM also chooses to use India as a platform for exports, Mahindra and Mahindra by themselves cannot scale up and do it because it's not their technology in the first place. It's not their equipment to sell. So if they want to sell it, they'll have to talk to their Korean counterparts in order to use this, provided the Korean counterpart wants to use the manufacturing platform in India. This is unrealistic to begin with. Just as to my mind, it was unrealistic to envisage that private Indian manufacturers can emerge as scale players in defence manufacturing in the first place. That itself was, I think, a big fallacy. This can only be done by defence public sector undertakings by pooling different types of manufacture of armaments and thereby achieving scale. If you've got one private manufacturer manufacturing guns here and somebody else manufacturing, that's not scale enough for you to enable any meaningful platform either for indigenous consumption or for export. So this is, I think, a fallacy which originates from the original fallacy which is we will expand private sector defence manufacture. It does not happen and it will not happen. My last question today is Donald Trump is going to be visiting India and there are two big deals that are being talked about that India is going to sign. One is for an integrated air defence weapons missile system. The other is for Seahawk helicopters for Indian Navy. What are the implications of this? Because I remember that this integrated air defence thing was offered to India when it was clinching its deal for S-400 with Russia. At that point, there were the indications that we don't require it. How do you see, I mean, if we sign it? The integrated missile defence system is more of a network-based defence system which the Americans and the Israelis both have developed and look to as a mainstay of their defence structures. So if India is looking at that, well, I mean, I don't know how essential that is in the way it is being put forward but by nature it is different from the S-400 system which is one anti-missile defence platform whereas an integrated missile defence system will be a more widespread and networked structure. So there is a difference there so I can understand if the army is interested in looking at systems like that. Although whether the American one is the right one to go for is something we can think about and discuss later. But as we discussed once earlier on this show, I have always believed that when Trump came here the Indian government will throw him some crumbs in terms of military purchase. And if you have noticed, almost all Indian purchase of US equipment has been specialised equipment in small numbers. Apache helicopters, Chinook helicopters, heavy lift choppers, Hercules 130J, the Galaxy. These are all systems being acquired in small numbers. So there is no technology transfer involved. There will be no offsets involved. This is government to government deals, straightforward deals, cash payment done. The choice of this Seahawk, it may look big in 2 billion dollars. It's a small order for 24 helicopters. So frankly speaking if you ask me it doesn't make a big difference to the American economy to get this order and it doesn't make a big difference to the Indian military that we have acquired these helicopters. So I view this as a political purchase and not a very great force augmentation that India has done in its navy compared to other similar helicopters that we could have purchased. To conclude, I mean if you take a look at defence budget or plans for defence export, grandiose and ambition, you know, projection of India being emerging as a major defence exporter and all and given the economic slowdown and everything, how would you sum up today? Not just the resource allocation but much more the defence, the way in which we are orienting a defence and the way in which we seem to be moving. Three aspects I'll focus on. First, I think this export mirage should be given up completely, especially export based on private sector participation because as I said these are all dependent on foreign manufacturers. So any export that you do also depends on your foreign partner whether he wants to use this for export or not, which is unlikely. The second aspect is I think India needs to focus far more on developing indigenous manufacturing and indigenous weapons system platforms which will require investment in R&D and in the budget discussions that you've just spoken of, the allocation for DRDO is really extremely small. With that kind of investment, you're not likely to be able to develop major weapons systems platforms. The drones that you spoke about, these are smaller drone systems. If you want the larger modern drone systems that other countries have got, you need to do that investment yourself in order to do it, which I don't see. If you had developed those, then I can understand you talking about export and if you want to involve private sector, if DRDO develops a drone, they would have private sector partners contributing to that manufacture whether it is for domestic consumption or for export. So to my mind, I think the government is getting its priorities inverted. They should not worry about exports nor about independent private sector roles. If you give a boost to the defense public sector undertakings which have the capability both in research and in production, it will automatically bring in the private sector for manufacture of sub-assemblies and assemblies etc. and may lead to some of them emerging as independent players on their own. If you look at Larson and Tubro for example, they've acquired their capabilities in shipbuilding and submarines through partnership with the defense shipyards and with DRDO and now if they're prepared to strike out on their own, it's fair enough. So that's the way to visualize expansion of the Indian defense sector and involvement of the private sector. But emphasis has to be on indigenous manufacture as well as indigenous capacity development to develop new and modern weapons platforms. Thank you Raghu for today. This is all for now. Keep watching NewsClick and if you have any comments or feedback, do write to us.