2nd April – Editorials/Opinions Analyses

Contents:

1. Still no bullseye, in volume and value
2. The battle to set oil prices: Russia’s move to reject production cuts
3. Tablighi Jamaat: its purpose, how it runs

STILL NO BULLSEYE, IN VOLUME AND VALUE: ON DEFENCE EXPORTS AND DEFENCE IMPORTS

Focus: GS-III Indian Economy, Internal Security

According to a report released by Stockholm International Peace Research Institute (SIPRI) for the period between 2009-13 and 2014-18, Indian defence imports fell even as exports increased. This is good for a nation that has had the record of being one of the biggest importers of Defence equipment.

2 Factors responsible for this shift

1. ‘Make in India’ initiative, as part of which a number of components from Indian private and public sector enterprises have been prioritised by the government.
2. Extraneous factors in the form of delays in supplying equipment by vendors and the outright cancellation of contracts by the Indian government or at least a diminution of existing contracts.

‘Make in India’ initiative

Under the Make in India initiative, the Defence Procurement Procedure (DPP) lays out the terms, regulations and requirements for defence acquisitions as well as the measures necessary for building India’s defence industry.

• A new procurement category called ‘Buy Indian Indigenously Designed, Developed and Manufactured’ (IDDM) has been created in DPP of 2016
• The ‘Make’ procedure has undergone simplification “earmarking projects not exceeding ten crores” that are government funded and Rs. 3 crore for Micro, Small and Medium Enterprises (MSMEs)
• The DPP has provisions that make private industry production agencies and partners for technology transfers.
• Small and Medium Enterprises (SMEs) share in Indian Defence market was 17.5% in 2016, now 54% .

Public sector driven

Among arms producers, India has four companies among the top 100 biggest arms producers of the world. The largest Indian arms producers are

1. Indian ordnance factories (37th rank)
2. Hindustan Aeronautics Limited (HAL) (38th)
3. Bharat Electronics Limited (BEL)
4. Bharat Dynamics Limited (BDL)

All four of these companies are public sector enterprises and account for the bulk of the domestic armament demand.

Explaining falling imports

Growing indigenization is not the sole reason for falling imports. Its is also because of the cancellation of some big-ticket items

1. India cancelled the India-Russia joint venture for the development of the advanced Su-57 stealth Fifth Generation Fighter Aircraft (FGFA) in 2018 due to delays and not having the actual “5th gen” capabilities
2. In 2015, we also reduced the size of the original acquisition of 126 Rafale Medium Multi-Role Combat Aircraft (MMRCA) from Dassault to 36 aircraft
3. Delays in the supplies of T-90 battle tanks, and Su-30 combat aircraft from Russia and submarines from France, in 2009-13 and 2014-18, also depressed imports.

SMEs not the favorites

SMEs still face stunted growth because India’s defence industrial model is at odds with global trends in that it tends to create disincentives for the private sector.

• Governments, including the incumbent, have tended to privilege Defence Public Sector Units (DPSUs) over the private sector, despite ‘Make in India’.
• This model is highly skewed, undermining the growth of private players and diminishes the strength of research and development.

Export trends

The trends look positive on the export front. Between 2012 and 2019, Indian defence exports, both Public and private, have seen a surge

The sharp rise in defence export products can be attributed to the measures introduced by Government

• In 2014, the government delisted or removed several products that were restricted from exports.
• It dispensed with the erstwhile No Objection Certificate (NOC) under the DPP restricting exports of aerospace products, several dual-use items and did away with two-thirds of all products under these heads.
• Small naval crafts account for the bulk of India’s major defence exports. However, export of ammunition and arms remain low.

Speaking of volume

As a percentage of total Indian trade, defence-related exports for the fiscal years 2017-18 and 2018-19 were 0.8 and 0.73%, respectively.

Thus, from a volume and value standpoint, Indian defence exports, while showing a promising upward trend, still remain uncompetitive globally. 

THE BATTLE TO SET OIL PRICES: RUSSIA’S MOVE TO REJECT PRODUCTION CUTS

Focus: GS-II International Relations

Even as the world grapples with COVID-19 pandemic, the energy war has started to precipitate the global oil prices to lower levels. 

Why the prices are falling?

Because the Organization of the Petroleum Exporting Countries (OPEC) and its alliance partners failed to reach any consensus on cutting back production that would enable prices to remain stable. There has been a spectacular fall of around 30% in crude oil prices.

• Demand for oil had already weakened owing to the global economic slowdown
• The weakening has become more pronounced due to the COVID-19 pandemic, which has hit China’s economy and reduced consumption by the world’s largest importer.

Selfish or Enemity?

• The U.S., as the largest oil producer today, has stayed away from the OPEC-plus arrangement, hoping that production cuts by OPEC-plus countries will help it increase its market share.
• Russia refused any production cuts, unleashing an energy war with Saudi Arabia.  Russia’s decision driven by its strategy of denying market share to American shale oil producers. This has forced the US administration to come up with a rescue plan for its Shale producers
• Russia also remains resentful of sanctions imposed on Rosneft, which is building the gas pipeline project Nord Stream 2 across the Baltic Sea, carrying Siberian gas to Germany, a major consumer.
• This pipeline was delayed due to opposition from Denmark’s environmental activists and could not be completed before the U.S. sanctions kicked in. Moscow has accused Washington of using geopolitical tools for commercial reasons.

Oil Revenue dependency

Both Saudi Arabia and Russia depend heavily on oil revenues — upwards of 80% of export revenues accrue from crude oil. Both are also fighting to retain market share.

Benefit to importing countries

Saudi Arabia has agreed to supply crude oil at lower rates to refiners in India and China, but not to other refiners in Asia. This will impact on India’s oil procurement from the U.S..

• Lower crude oil prices mean lower import bill for India, which is the world’s third-largest importer of crude oil and the fourth largest importer of LNG.
• However, collateral adverse consequences like the battering of the stock markets worldwide.
• From a high of $147 per barrel in 2008, crude oil prices have fallen to around $24 per barrel, and India with 80% of its energy requirements met by imports from the international market, stands to save Rs. 10,700 crores for every $1 drop in prices.

While this may help manage the current account deficit, fiscal deficit and inflation, there are non-oil related collateral factors that can cause countervailing adverse economic impact.

How to use the gains?

There is no doubt that India will benefit from lower oil prices, if the cost of fuel at the pump is passed on to consumers. It will reduce transportation costs and boost demand. The consumer, however, may not benefit much since the government may choose to use this financial windfall for other purposes, like bailing out banks which have been hollowed out by NPAs to leading Indian companies.

TABLIGHI JAMAAT: ITS PURPOSE, HOW IT RUNS

Focus: GS-I Indian Society

Over 200 have tested positive for COVID-19 from among 4,000-odd who had gathered in Delhi’s Markaz Nizamuddin, the headquarters of the Tablighi Jamaat.

What is Tablighi Jamaat?

Tablighi Jamaat, which literally means a society for spreading the faith, is a Sunni Islamic missionary movement.

• The proselytising movement aims to reach out to ordinary Muslims and revive their faith, particularly in matters of ritual, dress, and personal behaviour.

How did the movement begin?

Its roots lie in the Deobandi version of the Hanafi school of jurisprudence.

• It was launched by Deoband cleric and prominet Islamic scholar Maulana Muhammad Ilyas Khandhalaw in 1927 in Mewat.
• Its emergence also coincided with Hindu proselytising movements like the Shuddhi movement.
• While Maulana Ilyaz taught in Saharanpur in the mid-1920s, a few hundred kilometers away were the economically and educationally backward Meo peasants, mostly Muslims who were largely practicing Hindu traditions.
• Maulana Ilyaz began bringing Meo Muslims back into the fold of traditional Islam; he trained several young men from Deoband and Saharanpur and sent them to Mewat, where the Tablighi Jamaat established a network of madrasas and Mosque.

How wide is its reach?

In the first Tablighi conference held in 1941, approximately 25,000 people from across North India attended.

• After Partition in 1947, a Pakistan chapter was started in the town of Raiwind, Lahore. Currently, Bangladesh has one of the largest chapters.
• The Tablighi Jamaat also has a significant base in the United States and Britian
• It also has a presence in Indonesia, Malaysia, and Singapore.

How does it promote Islam?

The Tablighi Jamaat is based on six principles.

1. Kalimah: An article of faith in which the Tabligh accepts that there is no God but Allah and that Prophet Muhammad is his messenger.
2. Salaat or prayer five times daily
3. Ilm and dhikr: the knowledge and remembrance of Allah conducted in sessions in which the congregation listens to preaching by the imam, performs prayers, recites the Quran and reads the Hadith
4. Ikram-i-Muslim: the treatment of fellow Muslims with honour
5. Ikhlas-i-niyat or sincerity of intention.
6. Dawat-o-tabligh, or proselytisaton.

What happens at the gatherings?

• Between 8 and 11 am, the gathering is divided into groups of roughly 10 people each, and each group chooses a leader, preferably an elderly person.
• The group is given a destination, the distance depending on how much money the individuals have brought for this purpose.
• Between 3 and 5 pm, there is a talk on Islam for newcomers. After sunset, there is a recitation from the Quran, and on the life of the Prophet, with explanations.

What is the structure of the Tablighi Jamaat, as an organisation?

There is no defined structure, but there exists a hierarchic network of elders and mosques.

• Originally, it used to be headed by the Ameer, who would preside over the shura (council), the core of the organisation, and deal with important matters including international congregations known as Aalmi Ijtama.
• After the death of Maulana Inamul Hasan Kandhlawi, the third Ameer (1965-95), the post of Ameer was abolished, and Aalmi Shura (international advisory council) was appointed.
• After the death of Maulana Kandhlawi’s son Zubair ul Hasan Kandhlawi in 2015, the movement has been marked by factionalism.

What are these factions?

There are camps in India, Pakistan and Bangladesh. The “Nizamuddin camp” is headed by Maulana Saad Kandhalwi, great-grandson of Maulana Muhammad Ilyas, while a rival faction is based in Raiwind, Pakistan. Bangladesh, which hosts the biggest annual Aalmi Ijtama in Tongi, with around two million people attending, is another faction.