Reading Comprehension Set 9

The arguments in favour of FDI in defence are familiar. First, public sector companies in defence, Research and Development and allied industries have consistently failed to meet the requirements of the armed forces, especially given the global revolution in military technology. Second, the superior management culture of the private sector will ensure better adherence to budgets and timelines. Third, the country is compelled into repeated imports without any technology transfer (despite contractual obligations) because the military is always urgently in need of the technology. Therefore, the argument goes, encouraging foreign companies to invest in Indian defence and set up industries here will mean that money will be spent within the country, generating jobs and bringing in new know-how, with the possibility of exports.

In my opinion, none of these arguments address the specific and unique needs of the defence sector in India. Whatever else these measures might achieve, they will not help accomplish what must surely be the main goal, namely to build self-reliance in advanced military technology and reduce India’s debilitating dependence on foreign suppliers in the area of national security.

The FDI inflow itself tells a tale. All the liberalised provisions since 2001 have led to a meagre inflow of only $4.8 billion, in an overall FDI inflow of around $334 billion. It may be argued that it is too early to judge, but there are actually good reasons why defence companies do not and will not find FDI in another country attractive, and why there are few such examples across the world.

FDI means a long-term presence in India, and good returns on investment are possible only if repeat orders or contracts for newer models are assured. But, unlike cars or white goods, that will not always happen in military equipment. There may be gaps of many years or even decades between orders. For instance, India bought the Mirage 2000 in the 1980s and has clinched the Rafale deal this year, both from Dassault of France. In France itself, however, Dassault is reasonably assured of continuous business from regular domestic and European orders, as well as from staggered exports. Foreign subsidiaries or substantial FDI will, thus, always put pressure on India for repeat orders. Would dependence on a Lockheed Martin (India) or a Bharat Boeing be really very different from dependence on the U.S. principals?

Yes, more of India’s money will be spent in India rather than in other countries. But the Defence Procurement Policy anyway mandates 30 per cent offsets (50 per cent in high-value contracts). In other words, the supplier must spend 30 per cent of the contracted value within India through local manufacture and services. On the other hand, even if manufacture were by an Indian subsidiary, some specialised technology or components will always need to be imported. As is the case in car manufacture by Korean or Japanese subsidiaries in India, where numerous models that sell in smaller volumes are only assembled in India with imported components. FDI may, therefore, not be so different from offsets in terms of local manufacture, jobs, or money spent.

Q.1. Which of the following is the antonym of the word “debilitating”?

a) Wearing

b) Restorative

c) Exhausting

d) Tiring

e) None of these

Q.2. Which of the following is the synonym of the word “meagre”?

a) Sparse

b) Limited

c) Slender

d) All of the above

e) None of the above

Q.3. Choose an appropriate Title for the above passage :

a) Defence Ties

b) The status of the deals

c) The key is Technology not Money

d) Aerospace companies

e) India and Its Defence

Q.4. Which of the following companies name is mentioned in the above passage?

a) Sukhoi

b) Mikoyan Gurevich

c) Dassault

d) Hindustan Aeronautics Limited

e) None of the above

Q.5. Which of the following can be inferred from the passage?

a) The Public Sector Companies have failed to meet the requirements and Technological advancement.

b) FDI is not the solution however technology transfer is.

c) The reason for meager inflow of investment is the weak commitment from Indian government.

d) All of the above

e) None of the above

Q.6. Which of the following is the antonym of the word “adherence”?

a) Cohere

b) Flout

c) Bond

d) Attach

e) None

Q.7. Which of the following is the antonym of the word “substantial”?

a) Material

b) Significant

c) Valuable

d) Major

e) Worthless

Q.8. Why the author is insisting more on Technology transfer rather than FDI inflow?

a) Because technology transfer will result in the manufacturing of defence equipments indigenously.

b) Because FDI will result in the lesser money inflow.

c) Because major companies are afraid due to the non commitment by government.

d) Both (a) and (b)

e) Both (a) and (c)

Q.9. Which of the following is not true according to the passage?

a) Some specialized components will need to be imported even if some Indian subsidiary manufactures it.

b) FDI will result in the sheer pressure on the government for repeat orders.

c) Due to military needs, the country is compelled to repeated imports.

d) FDI is needed for the country, which will result in short term investment for good returns.

e) None of the above

Q.10. Which of the following is the synonym of the word “offsets”?

a) Countervail

b) Equalize

c) Neutralize

d) Both (b) and (c)

e) All of the above



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