China’s rise, West’s stagnation demand radical reforms – Firstpost

The world is witnessing a transition into a prolonged era of strategic competition, now being often referred to as Cold War 2.0, marked by China’s long-term strategic planning and the Western world’s inertia in adapting to new realities. The US and Europe continue to operate within outdated paradigms shaped by the Cold War, while China has rapidly built an expansive industrial base, replacing the once-dominant American manufacturing and defence ecosystem.

The Western Military-Industrial Complex (MIC) now resembles a monopolistic structure akin to the Soviet system, with a handful of dominant defence contractors controlling nearly all production and procurement. In the US, where there were 51 defence primes in 1993, consolidation has reduced this number to just five, stifling innovation and increasing inefficiencies. Cost-plus contracting has exacerbated the issue, with the top primes now controlling 85 per cent of defence contracts.

The decline in America’s capacity to scale defence production—both in terms of manufacturing platforms and maintaining operational readiness—has created vulnerabilities. The loss of industrial depth, engineering talent, and rapid production capabilities has weakened the supply chain, making even the most basic defence procurement cycles excessively long and inefficient.

India, by adopting a Soviet-style Public Sector Undertaking (PSU)-driven model, has similarly hindered its own capacity for innovations. A centrally planned defence industry has failed to keep pace with rapid technological advancements, making India heavily dependent on foreign imports. Without bold and immediate reforms, India risks losing its strategic deterrence capability in an increasingly volatile world.

Urgent Need for Structural Reform

India must move beyond its current trajectory and embrace an innovation-driven, agile, and commercially integrated defence industrial base. Key principles of this transformation should include:

• Establishing a “Bharat Raksha Plan” akin to the “Manhattan Project”: A mission-oriented, time-bound initiative staffed by the most talented technologists and strategists to drive defence innovation. Talent is not fungible—there must be no artificial constraints such as age, politics, or bureaucratic hurdles.

• Integrating national security and economic prosperity: The defence sector must not be viewed in isolation but as a pillar of economic growth, job creation, and industrial competitiveness.

• Breaking down monopolistic structures: PSUs and oligopolistic defence contractors must give way to a competitive, innovation-driven ecosystem. The future lies in dual-use technologies developed at commercial scale and speed.

• Moving beyond screwdriver technology: Assembling foreign platforms in India without indigenous innovation will not lead to sustainable growth. India must invest in R&D and high-tech manufacturing.

• Shifting away from L1 Syndrome: Lowest-cost (L1) procurement stifles quality and innovation. Competitive pricing should be balanced with value-driven outcomes.

• Leveraging commercial technologies for defence: Companies like Palantir and Anduril have demonstrated that software-driven platforms are the future of warfare. Commercial sensor integration and AI-driven analytics will reduce costs and enhance capabilities.

• Expanding risk-based capital investments: The defence industry must be built on venture-style funding models, where taxpayers see tangible benefits in lower costs and enhanced national security.

• Accelerating production at scale and speed: The future of warfare is shaped by rapid deployment. India must adopt advanced manufacturing methodologies to produce high-tech defence systems efficiently.

• Re-evaluating classified contracts: Excessive classification slows innovation. The private sector, given the right incentives, can contribute just as effectively as government-cleared entities.

• Prioritising software-driven warfare: Future conflicts will be predominantly software-defined. India must ensure effective utilisation of its highly talented IT manpower and develop a robust defence software industrial base to gain a competitive advantage in winning defence contracts for software-intensive systems.

• Doctrine evolution: Net-centric warfare will deliver effective architecture in warfare, and new concepts such as mosaic warfare and autonomous warfare become easy to adapt.

Strategic Opportunities for India

India stands at the crossroads of an unprecedented opportunity. Consider the following:

• Global military budgets: The US and Europe collectively spend over $1 trillion annually on defence. The US is redefining its approach to software-driven, and Europe must increase its defence budgets in the scenario of today.

• Shift towards cost-efficiency: The US is pursuing cost reduction through software-driven solutions and advanced sensor integration.

• Rise of dual-use technologies: Companies like Palantir and Anduril, with higher valuations than Lockheed Martin, exemplify the new paradigm of software-first warfare. Chinese defence procurement is from companies that generate 70 per cent plus revenues from commercial-driven business.

• Need for modernisation: India must replace obsolete military systems with cutting-edge technology, necessitating rapid procurement and innovation.

• Diversification of military supply chains: India must carefully navigate between Western and Russian systems while ensuring interoperability and supply chain security.

• Leveraging India’s skilled workforce: The US and Europe have absorbed over 3.5 million skilled immigrants and 2 million temporary workers in technology sectors. India must retain and deploy its talent for indigenous defence innovation.

• Expanding defence-industrial ties: Over 80 per cent of U.S. and European defence systems rely on commercial software technologies. India must become a key supplier in this ecosystem.

Transformative Policy Interventions

To position India as a global defence-industrial hub, the following policy actions must be taken:

• Reciprocal defence procurement agreements (RDPs): India must negotiate agreements that allow its defence industry to participate in global supply chains, rather than simply importing foreign technology.

• Strategic alignment with the Western defence ecosystem: A well-negotiated RDP would enable India to supply software and hardware solutions, enhancing its industrial base while ensuring access to the latest military technologies.

• Enhancing India’s economic security: India currently derives $210 billion in remittances, predominantly from the Western world, indicating a strong economic relationship that can be further leveraged for defence collaboration.

• Positioning India as a global defence supplier: India should aim to become an industrial engine for allied nations, offering cost-effective, high-quality defence solutions at scale.

• Emphasising R&D as a national mission: Defence R&D must be prioritised at the same level as space and nuclear programs, with targeted funding and strategic oversight.

• Adopting agile procurement models: The legacy procurement processes must be overhauled in favour of outcome-driven, performance-based contracting models.

Conclusion

The Indian leadership has launched “Aatmanibharata” as the core long-term strategy of the country. As part of this, it resolved to export $5 billion in defence products in 3 years, and significant achievements have been achieved.

If India were to mould its thinking around the advantages of signing a “reciprocal defence procurement” (RDP) agreement with the US/NATO, the impact would exceed $25 billion annually over time. This will allow India to absorb knowledge and provide an alternate supply chain to the Western military complex.

Technology-based software development, which is the future of warfare, will be the single biggest beneficiary, as the foundational knowledge built in India will exponentially increase the opportunities.

Defence corridors are useful, provided they are built as ecosystems. Defence innovations without dual use are an unsustainable business model. The ecosystem must be built on interdependencies in the supply chain as well as use in commercial applications.

India’s current defence-industrial model needs structural reform in the face of emerging threats and the latent potential. The pace of technological change demands immediate action.

If India acts decisively, it can emerge as a global leader in next-generation defence technologies. However, failure to act in a timely manner will result in strategic vulnerability, technological dependence, and the erosion of India’s deterrence capabilities in an increasingly hostile geopolitical environment. Time is of the utmost essence.

Krishna Chandra is a technology thinker and an industrialist. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.