Defence and Security Alert Magazine (DSA) February 2017 Edition by Ocean Media

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Volume 8 issue 5

February 2017

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‘Demonetisation Hammering Terrorism and Fake Currency’ AERO INDIA 2017

“Asia’s Premier Air Show” 14-18 February 2017

editor’s note

DSA is as much yours, as it is ours!

he thunderbolt of demonetisation hit the country late on 8 November 2016. Like all bolts, it came out of the blue and as with all, it took the country by surprise. None were prepared for it and its consequences will be felt for some time to come. Ostensibly to make the country more transparent, demonetisation carries enormous potential in other fields as well. It’s impact is not simply in the finance and economic fields, but influences national security in a big way too. The benefits are as big as the country allows them to be. But thinking big has always been an Indian handicap. The most obvious comments, available from simple visual evidence as well, has been the instant cessation of arson and other public disorder in the Kashmir valley. It seems as though the entire momentum has been taken away from the separatist movement. Their sails now hang low like a flagpole sans the breeze. This has been the most easily discernible development from the demonetisations of 500 and 1000 rupee notes. Thus providing further fuel to the argument that this whole issue has been engineered by the use of counterfeit currency and black money. Otherwise, how can a seemingly mass supported movement suddenly fall into silence? This seems to have happened to another, equally sinister, terrorist movement – the Naxals. Their dependence on cash, generated from extortion and other illegal means, ensured that the cadre and their overground workers were always kept in comfort. That now seems to be a thing of the past as suddenly their cash chest has been made worthless. And with it has gone their ability to fund the purchase of explosives, ammunition and other combat materials. Not to mention that information is also routinely bought from such black monies. All that has gone up in smoke, as they say. Now that these benefits have been generated in the counter-terrorist field, it is now up to the country as a whole to push for greater impact on the larger issue of national security. There is an urgent need for that to happen, since the regional and global security environment continues to remain turbulent. It will likely remain so for the foreseeable future. It is thus incumbent on the nation to take advantage of these demonetisations to further enhance the country’s security. The onus in now on the citizens, for their participation is essential to ensuring success in the security field.

The most fundamental advantage to national security can now come from a greater availability of resources for India’s defence and security forces. People have perforce deposited lakhs of crores into the regulated banking system. This availability of such enormous funds can be a windfall for those budgeting defence and security. Modernisation of the armed forces and the security forces, has always been handicapped by the uneven availability of funds. Equipment shortages and manpower enhancement, has been patchy because the funds haven’t been made available on a regular basis. Now that the government has enormous amounts available in the banks, this availability can be smoothly regulated. A long term defence modernisation plan can now be implemented. But for it to be implemented, it must first be prepared after a thorough preparation that involves all stakeholders. No short cuts must be taken since the opportunity is now there and it is enormous. So all stakeholders must pool their intellectual resources, set aside egos and turf battles and get to work. A long term vision, a national security map, that looks at current and emerging threats, challenges and opportunities, must be debated threadbare. The implementation of this long term plan must also include identifiable targets that cater for short, medium and long range goals. Targets, in this case, would mean timelines that generally govern implementation. The goalposts that have to be crossed by a certain time period in order to keep pace with global and regional changes, and challenges. A comprehensive net assessment can provide the first steps to making a thorough national security and defence blueprint. This net assessment should be placed in the public domain for scrutiny by the well informed. For a policy that is debated and discussed through public participation is one that will stand the test of time. After all taking people into confidence is the first step to making the country more secure. For it is the people who provide the nation its ultimate strength.

Manvendra Singh February 2017

Defence AND security alert

publisher’s view

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Volume 8 | Issue 5 | February 2017 Chairman Shyam Sunder Publisher and ceo Pawan Agrawal President Urvashi J Agrawal Director Shishir Bhushan Editorial Editor-in-Chief Manvendra Singh Associate Editor Supriya Aggarwal Assistant Editor Diana Mehra Business Development General Manager Nitin Agarwal Corporate Communications Natasha Creative Manish Kumar Alka Sharma Representative (J&K) Salil Sharma Correspondent (Europe) Dominika Cosic Production Dilshad and Dabeer Webmaster Sundar Rawat IT Operations Sonia Shaw Abhishek Bhargava Photographer Subhash Circulation and Distribution Vijay Kumar E-mail: (first name)@dsalert.org info: info@dsalert.org articles: articles@dsalert.org subscription: subscription@dsalert.org online edition: online@dsalert.org advertisement: advt@dsalert.org Editorial and Corporate Office Prabhat Prakashan Tower 4/19, Asaf Ali Road New Delhi-110002 (India) +91-011-23243999, 23287999, 9958382999 info@dsalert.org | www.dsalert.org Disclaimer All rights reserved. Reproduction and translation in any language in whole or in part by any means without permission from Defence and Security Alert is prohibited. Opinions expressed are those of the individual writers and do not necessarily reflect those of the publisher and/or editors. All disputes are subject to jurisdiction of Delhi Courts. Defence and Security Alert is printed, published and owned by Pawan Agrawal and printed at Archana Advertising Pvt Ltd C-78 Okhla Industrial Area Phase-1, New Delhi-110020 and published at 4/19, Asaf Ali Road, New Delhi (India). Editor: Manvendra Singh

February 2017 dsalert.org

Demonetisation: A Hammer On Terrorism And Fake Currency

ndia has a prolific chronicle of dates which we cherish every year as a part of our proud revolutionary history. Joining the list of revolutionary dates is the event of 8 November 2016 which has served as yet another revolution in modern India. Every Indian became associated, willy-nilly, with this date. When I say ‘everyone’ it includes not only individuals but organisations, homes and every sector of human endeavour in India. There has been a great deal of hue and cry since then. Controversies rose in a flurry after the demonetisation drive by the Government of India. But, as a matter of fact, I look at this one step as a very positive one to strengthen the defence and security apparatus. I believe in the sagacious dictum that ‘easy comes, easy goes’ and this applies to easy money as well. Easy-money has eased and helped the operations of terrorist groups within the country and nurtured a nexus with many other likeminded anti-national elements. With one stroke of demonetisation, the supply of currency for terrorist activities was cut and it has become very challenging to fund ‘Sleeper Cells’ and facilitate their anti-national activities. We can very well see that there has been a sharp decline in terrorist and Naxal movements across the country. This phenomenon has strengthened and bolstered the morale of our defence and security personnel. This will also bring a strong check on the fake Indian currency which earlier used to grease the wheels of terrorism and sow instability in the economy. With the introduction of the new currency, it is another blow to the hawala and fake currency operators. However, such a step is likely to slow down the procurement process under the new Defence Procurement Policy for the defence forces due to the nonavailability of funds in the banks. There are aslo apprehensions that the value of Indian Rupee maybe adversely affected. But let us brace ourselves with the conviction that the government will take all the necessary actions to control the devaluation of the Indian Rupee. Our experts who have a long hands-on experience in the defence and security forces have highlighted the impact of demonetisation as the hammer on the terrorist and Naxal activities in this edition. Team DSA is all set to bring the research-based excellent content always in each edition and we are sure that you will get an altogether new view on the demonetisation and its positive effects on national security. Jai Hind!

Pawan Agrawal @dsalert

Contents

An ISO 9001:2008 Certified Magazine

Supernotes And Terrorism Dr Rajiv Nayan

Win-Win For National Security Air Marshal Anil Chopra (Retd)

Decapitation In One Stroke Mukund Puranik

Impact On Economy And Security Vice Admiral Arun Kumar Singh (Retd)

It Can Bear The Brunt Amit Cowshish

Short-term Gain Must Be Extended Over Time 21 Pratap Heblikar WIN W

IN N

ATI O

A Surgical Strike On Terror Dr Harsh V Pant

Automatic Blacklisting: Curse On Defence Procurement Lt Gen (Dr) Vijay Kumar Saxena (Retd)

Impact On The Defence Sector Col KV Kuber (Retd)

Bureaucracy And Benami Next VK Deuskar IPS (Retd)

Indicators Of Impending Changes Pavan Duggal

Indiaâ&#x20AC;&#x2122;s Long-term Military Aviation Partner Air Marshal Anil Chopra (Retd)

Transparency In Formulating Specifications For Equipment Ravi Kumar Gupta

Follow Up The Disrupted Money Trail Cecil Victor

February 2017

Defence AND security alert

demonetisation ONE-TIME STRIKE

Supernotes And Terrorism Interestingly, the decision of 8 November, 2016 has resulted in a real supernote in `2000 denomination. If its misuse is not checked the entire benefit of demonetisation, at least for fighting terrorism, will go in vain. Moreover, Pakistan which has been the source of fake Indian currency has not withered away. It will set up new facilities to print fake notes. India may have to keep monitoring and taking appropriate action.

n 8 November 2016 the Indian Prime Minister, Mr Narendra Modi announced that the five hundred and one thousand rupee notes would cease to be a ‘legal tender’ from 8 November midnight. The PM also announced in the same address that the government would introduce a new five hundred rupee note and two thousand rupee note. From 8 November 2016 onwards, India does not have one thousand rupee notes. Of course, fighting corruption was the principal aim. But fighting terrorism was stated as one of the objectives of the announcement. The Prime Minister, in his address, stated, “Terrorism is a frightening threat. So many have lost their lives because of it. But have you ever thought about how these terrorists get their money? Enemies from across the border run their operations using fake currency notes. This has been going on for years. Many times, those using fake five hundred and thousand rupee notes have been caught and many such notes have been seized.”

Guestimates

The government of India has been releasing statistics of the seized Fake Indian Currency Notes (FICN) in the country every year. In 2015, the total amount of seized and recovered currency was `43,83,43,665 and till September 2016, the total amount was `27,79,39,965. In 2016, the Indian Statistical Institute estimated that the FICN worth `400 crore are in circulation. On 24 November 2006, the Indian President in an address informed: “The total

India raised the matter with China and pointed towards the arrest of a Pakistani national in Guangzhou

quantum of the fake currency which is under circulation may be over `1,000 crore. There may be many more cases of this nature which has not come to our attention so far.” Now, the Indian government maintains that it is very difficult to make an accurate estimate of the FICN in circulation. For decades, India has been facing the problem of terrorism and one of the sources of terror funding has been fake currency. Fake currency is used to provide remuneration to the cadres, build infrastructure, buy weapons and other required items, and fund over-ground workers and sympathisers or supporters to shield and assist terrorists. The currency is also used to finance families of killed terrorists.

Packaged Terrorism

DrAnu Rajiv Sharma Nayan

The writer is a Senior Research Associate at the Institute for Defence Studies and Analyses (IDSA), New Delhi since 1993, where he specialises in export control, nonproliferation and arms control. He was a Visiting Research Fellow at Japan Institute of International Affairs, Tokyo, where he published his monograph Non-proliferation Issues in South Asia.

Terrorism in Kashmir is specially fed with fake currency and the higher denomination notes. Time to time, security forces have been seizing cash meant for terror. In Kashmir, more than 15 years ago, investigative agencies recovered ‘50 packets of fake currency notes of `500 denomination’. This continued. The government of India registered ‘24 cases in which 117 people’ had been arrested since 2009. In fact, most of the cases of fake currency are related to Kashmir. Terrorism is fed with fake currency

February 2017

Defence AND security alert

demonetisation ONE-TIME STRIKE India has blamed Pakistan for pumping fake currency in the country. The currency is used to fund terrorism in India. In fact, the government of India, on a number of occasions, in its dialogue with Pakistan raised fake currency and terror financing, though it is a different matter that Pakistan did not pay heed to India’s call. Even the Home Minister of the previous United Progressive Alliance government had stated in the Parliament, “I highlighted the fact of the increasing number of

In the ultimate analysis, it may be safely asserted that the country has been immensely benefitted on terrorism front consignments of Fake Indian Currency Notes being seized in India and by other countries from individuals coming from Pakistan. This indicated that the production and circulation of the FICN is growing in Pakistan, direct or indirect patronage of influential elements or groups in Pakistan cannot be ruled out.” Security agencies have been reporting that terror funding in the higher denomination may even be through the genuine currency. One of the demands of the security agencies has been to end higher denomination notes. They maintained that the end of these notes will adversely affect terrorist groups, hawala dealers, people transacting in fake currency along with the companies and individual involved in routing money for profit. At times, the groups and individuals that are involved in the money laundering may not be knowing ramifications of their act.

Initiatives

The government has been coming out with a number of plans, initiatives and measures like The Unlawful Activities (Prevention) Amendment Act, 2012 to curb terror funding through fake notes in the higher denomination. The Central government through agencies like special FICN Co-ordination (FCORD) Group has been trying to fight the problem by sharing Intelligence information with the Indian States. The States are also encouraged to gather information on the FICN to fill the gap as much as possible. The government set up the Terror Funding & Fake Currency Cell (TFFC) in National Investigation Agency (NIA) to investigate terror funding and fake currency cases. However, it had little success in this endeavour. India has been using different bilateral and multilateral forums to highlight the issue of fake currency. In the meetings of the India-US Homeland Security Dialogue, the counterfeit currency has been an important agenda. In one of such meetings, it was stated regarding India that “Terrorist infiltration or fake currency inflow does not only take place through our western border, but is often routed through countries that we share open borders with.”

China Factor

In the other bilateral level meetings, too, India has been underscoring the relationship between the fake currency

February 2017 dsalert.org

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and terrorism. India raised the matter with China and pointed towards the arrest of a Pakistani national in Guangzhou with fake Indian currency. The Home Minister, Rajnath Singh asked China, which is supposed to have a huge amount of influence over Pakistan, to exert it for ending production of fake currency. Moreover, India is quite worried over the smuggling of fake Indian currency into India through China. It is a different matter whether China will really use its influence to check Pakistan’s behaviour notwithstanding the fact that the same elements are disturbing China as well.

Diplomacy

On 6 June 2015, India and Bangladesh signed a Memorandum of Understanding (MoU) to prevent and counter smuggling and FICN. Before in Bangladesh, fake Indian currency was seized by the Bangladeshi security agencies. India and Nepal initiated capacity building programmes to enhance the capability of enforcement agencies for the purpose of countering fake currency and terror financing. India also discussed the issue with Malaysia. India has been using South Asian Association for Regional Cooperation (SAARC) to raise the issue of fake currency and terrorism. At the seventh meeting of the SAARC, Ministers of Interior or the Home SAARC, the Indian Home Minister, Rajnath Singh stated that “Trafficking of drugs, coupled with the problem of increasing circulation of fake currency, feeds into supporting terrorism and can create economic de-stabilisation in our region.” The same fact was reiterated in September 2016, when Dineshwar Sharma, the then Director of the Indian

Fake currency have been seized recurrently by the Army

No one denies the fact that the terror groups may work out their finance flow Intelligence Bureau at the second meeting of the High Level Group of Eminent Experts to strengthen the SAARC Anti-Terrorism Mechanism highlighted the problem of fake currency which is maintaining terrorism. At Interpol meetings, too, India has been raising the issue and urging the Interpol to take action.

Results

A section of the Indian media brought to the notice that two main Pakistani presses printing counterfeit Indian currency had been shut down. Interestingly, the current phase of terrorism in Kashmir estimated to be down by 60 per cent just with the announcement initially. A few analysts disagree with the projection and assert that by the end of October, stone pelting was already down by more than 80 per cent. With the passage of time, there was a pleasant surprise in Kashmir. Street protests and agitation disappeared for weeks. However, the danger still looms large. Several analysts and media reports are reluctant to buy the idea that peace will remain forever. Through hawala and even new currency will be made available to the terror groups operating in Kashmir. Apparently, denotification resulted in difficulties in procurement of arms by insurgent groups. Different

Naxal groups were worst hit. Media reported that Naxal groups had tried to take help of common people in Jharkhand and Chhatisgarh to convert their notes. A leading national daily reported that “469 Maoists and their sympathisers have surrendered before the authorities since 8 November alone. More than 70 per cent of the surrenders have happened in Malkangiri district in Odisha, where Andhra Pradesh Greyhounds killed 23 Maoists in an encounter…” Another report, which may be somewhat exaggerated informed, “Naxals have stashed more than `7,000 crore in Bastar region alone.” This is a common understanding that some stashed notes may be exchanged through Naxal supporters and sympathisers but it will be difficult to exchange all the money stored by the groups. In the ultimate analysis, it may be safely asserted that the country has been immensely benefitted on terrorism front because of the demonetisation of the ‘supernotes’. As discussed, reports emanating from Kashmir notwithstanding the analyses that stone throwing was already on decline and about naxalism indicate that demonetisation has helped, possibly temporarily. No one denies the fact that the terror groups may work out their finance flow. A country like the United States is also confronting the issue and doing research and follow up works.

Could Prove A Phyrric Victory

The Indian government also may have to do the same. Interestingly, 8 November decision has resulted in a real supernote in `2,000 denomination. If its misuse is not checked the entire benefit of demonetisation, at least for fighting terrorism, will go in vain. Moreover, Pakistan which has been the source of fake Indian currency has not withered away. It will set up new facilities to print new notes. India may have to keep monitoring and taking appropriate action. There are other forms of terror funding; when a source is choked, other sources may be opened. India may have to be extra cautious on other sources of funding. Now the government is not only better informed but has gained experience after the exercise.

February 2017

Defence AND security alert

demonetisation HAMMERING TERRORISM AND FAKE CURRENCY

Win-Win For National Security

While inflation in the US and reforms in China are key factors, the world banks on higher consumption in emerging markets like India. India, Indonesia, Bangladesh, the Philippines, Brazil, Mexico Colombia, Nigeria, Ethiopia and East Africa have been able to accelerate growth out of their own power.

n the evening of 8 November 2016, Prime Minister Modi addressed the nation and announced demonetisation of the `1,000 and `500 currency notes. This was his second surgical strike within a month. Old currency was to be removed from circulation by depositing in the banks and the same was to be replaced by the new currency. By definition, demonetisation is the act of stripping a currency unit of its status as legal tender. The 500 and 1,000 rupee notes, the two biggest denominations accounted for 86 per cent of the countryâ&#x20AC;&#x2122;s cash supply. The governmentâ&#x20AC;&#x2122;s goal was to eradicate counterfeit currency, fight tax evasion, eliminate black money gotten from money laundering and terrorist financing activities and promote

a cashless economy. By making the larger denomination notes worthless, individuals and entities with huge sums of black money who got them from parallel cash systems were forced to convert the money at a bank which is by law required to acquire tax information from the entity. If the entity could not provide proof of making any tax payments on the cash, a tax penalty of 200 per cent of the tax owed was imposed. The exercise was thus of mammoth scale requiring a national resolve and effort.

Role Of Armed Forces

The defence forces are often called out under emergent conditions. They are the last resort to fall back on by the nation. They played a great role in the efforts

WIN -WIN

NAT ION

IT Y

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Anu Air Marshal Sharma Anil Chopra PVSM, AVSM, VM, VSM (Retd)

The writer was a pioneer of the Mirage 2000 fleet and commanded a Mirage Squadron, two operational air bases and the IAFâ&#x20AC;&#x2122;s Flight Test Centre ASTE. He was the Team Leader of an aircraft upgrade project in Russia. Currently, he is a member of the Armed Forces Tribunal at Lucknow.

Demonetisation is a surgical strike on fake currency

to make the fresh currency available to the public at the earliest. The Armed Forces serve the nation by providing the HADR (humanitarian assistance and disaster relief) in aid to civil authorities. Two hundred men of the Grenadier Regiment were deployed at the Dewas currency printing press to support round-the-clock operations and for ensuring smooth and secure despatch. This press has a daily capacity to print 2 crore `500 notes. The other currency printing presses in the country are at Nashik (Maharashtra), Salboni (West Bengal) and Mysuru (Karnataka). The Indian Air Force put into service its heavy transport aircraft for ferrying fresh currency to various places across the country. The Indian Army personnel were deployed in at least two printing units to secure the venue and the currency. The IAF planes transported nearly 700 tonnes of freshly-printed currency. The helicopters took cash to remote areas.

Cash to non-cash ratio in India will reverse in the next 10 years. Demonetisation would boost the GDP in the long run Demonetisation Advantages

Demonetisation is known to have many advantages. First, every note that comes into the bank leaves behind a trail. It immediately allows identification and removal of fake currency much of which is used to fund terror and other illegal activities. It also helps flush out unaccounted (black) money. It chokes funding to terrorist organisations. Terrorism in J&K and North-East and also Maoists are known to receive currency, illegally printed abroad. Removal of part of the currency would also mean reduced inflation. With more transactions getting digitised, tax compliance would increase. More people would now be paying taxes. Better tax compliance would make it possible for the government to cut tax rate

thus putting more money with the public for spending. Terror incidents in J&K and Naxal areas have already shown an initial decline. Increased use of banking system and digital money transfer means will put much larger sums of money into banks resulting in better use for nation development. Individuals would benefit from interest on bank deposits. Printing notes is an expensive exercise and lesser notes in circulation would mean savings. The demonetisation is likely to bring down inflated rates of property and other sectors. Combination of additional actions will bring in more money. There will be tangible benefits for the Armed Forces and for defence procurement also.

Effect On National Security

Corrupt illegal practises are one of the biggest threats to national security. Smuggling, illicit arms production or trade, illegal drug trade, human trafficking and fake currency all fund and promote anti-national activities. All those who are not part of the formal economy can be conduits. All anti-national activities are threat to the national integrity. India currently has terror activities mainly in J&K, North-East and Naxalite areas. It is a well-known fact that Pakistan has been printing high denomination notes and injecting into India through Nepal, Bangladesh and the North-East. This is part of their strategy to slowly bleed India through a low-intensity conflict. While the Armed Forces work towards securing the borders, removal of the fake currency and black money removes a significant part of terror money for one time. Improving tax compliance means more collections and in turn more funds available to the nation. Part of the additional funds will be available for better security infrastructure and better weapons and kits for security forces engaged in anti-terror or anti-national activities.

Defence Budget Offshoots

China started becoming a global military power only after it could allot much larger amounts to defence

February 2017

Defence AND security alert

demonetisation HAMMERING TERRORISM AND FAKE CURRENCY

Demonetisation provided a fillip to the Make In India programme

budget. Emerging super-power China and the perennial enemy Pakistan are already colluding against India and working closely together on all defence matters. India is one of the most threatened nations in the world. It currently spends around 1.7 per cent of the GDP on defence which amounts to around US $42 billion vis-à-vis China’s near US $150 billion. As China pulls away and ahead, India needs to spend more on defence.

There will be tangible benefits for the Armed Forces and for defence procurement also Indian Army urgently needs tanks, howitzers, small arms among many other things. The Indian Air Force (IAF) needs huge funds to procure nearly 500 aircraft in next one decade to replace the ageing fleets and to build up to 42 squadrons. The Indian Navy needs many more ships, including new aircraft carrier and submarines. If India’s annual income goes up through better compliance then greater funding will be available for defence procurements. The international trade is mostly through digital means at best it may be routed through tax havens, the money trails are traceable. There are only two elements in defence procurements, availability of funds and negotiation strengths to get value for money. Strengthening the Indian Rupee would make imported weapons cheaper. The many policy initiatives like demonetisation are likely to strengthen the Rupee.

Win-Win For Defence Procurement

Defence acquisition is not a standard open market commercial form of procurement and has certain unique features such as supplier constraints, technological complexity, foreign suppliers, high cost, foreign exchange implications and geo-political ramifications. Yet, it is important to maintain the highest standards

February 2017 dsalert.org

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of transparency, probity and public accountability. Selfreliance is a major cornerstone on which the military capability of any nation must rest. It also immensely helps leverage the manpower and engineering capability within the country for attaining self-reliance. ‘Make in India’ remains the focal point of the defence acquisition policy or procedure. In case the economy improves, it will strengthen the Make-in-India ability. It will also improve Indian bargaining power with the strategic partners for promoting defence production in the private sector. The DPP 2016 focuses on institutionalising, streamlining and simplifying defence procurement procedure to boost Make-in-India by promoting indigenous design, development and manufacturing of defence equipment. Enhancing the role of MSMEs in defence sector is one of the defining features. Demonetisation combined with measures for reducing corruption and License Raj will bring clarity for private sector and give confidence to enter defence production. After the VVIP helicopter deal being cancelled, the foreign vendors have also realised that corrupt practises would be penalised. This is bound to make all deals cleaner and increase value for money. The Buy (Indian-IDDM) category refers to the procurement of products from an Indian vendor meeting one of the two conditions: products that have been indigenously designed, developed and manufactured with a minimum of 40 per cent Indigenous Content (IC) on cost basis of the total contract value or products having 60 per cent IC on cost basis of the total contract value, which may not have been designed and developed indigenously. The demonetisation will help all costing to remain overboard and in turn give advantage to arrive at correct percentages.

Tangible Benefits And Way Ahead

Demonetisation is only the beginning of cleaning up of Indian economy. It is

a big positive for financial inclusion. Winston S Churchill had once said “Never let a good crisis go to waste”. PM Modi has decided to do much more. The tree of the black money has been cut – the roots have to go next. The unfolding actions may make 1991 reforms seem as ‘Mild’. The World Bank report says that only 39 per cent of all account holders in India own a debit or ATM card. A mere 15 per cent of adults use a bank account to make or receive payments. In contrast, about 40 per cent of adults in China and Brazil use bank account. In France, 92 per cent people make cashless payments; UK and Sweden see 89 per cent payments through cashless modes, the figure for US stands at 80 per cent. Cash helps the corrupt keep their black money hidden as transactions bypass the banking

An honest modern digital economy will certainly put more bucks in the government coffers channel and remain undetected or unaccounted. Data shows only a little over 1 per cent of the Indian population pays income tax. A nation of over 125 crore people had only 3.65 crore individuals filing their tax returns in the assessment year 2014-15. Only 5.5 lakh people paid income tax of more than Rs 5 lakh. This means that only 1.5 per cent of those filing tax returns (3.65 crore) are contributing to 57 per cent of tax, with a huge number of individuals outside the tax net. To get more people under the tax net, the government plans reforms in the existing tax policy. According to the World Bank’s ‘Doing Business Report 2016’, India now ranks 130 out of 189 countries, moving up only four places from last year’s ranking. Lesser cash transactions will lead to lesser unaccounted or black money in the market. Already, from metros to small cities, many traders both big and small have started using other modes of payment than cash. Most currencies lost against the dollar in 2016, rupee lost the least. Currency swap has already changed payments behaviour. Cash to noncash ratio in India will reverse in the next 10 years. The demonetisation would boost the GDP in the long run.

Growth On Own Power

Global growth has started picking up after a number of weak years. The IMF forecasts a global GDP growth rate of 3.5 per cent, which though still low is better than the average over the past five years. Most advanced economies need strong governments to implement far-reaching structural reforms. To restore political trust, governments need to deliver real wage increases, more jobs and better welfare. This can only happen if growth is revitalised by reforms. Global growth is still expected to be weak next year. A combination of the slow recovery in the US, financial weak Europe, as well as a deceleration of growth in China will keep uncertainty in financial markets. While inflation in the US and reforms in China are key factors, the world banks on higher consumption in emerging markets like India. India, Indonesia, Bangladesh, the Philippines, Brazil, Mexico,

Top: Nagrota post November 29 attack; above: tax penalty was imposed for not providing tax information

Colombia, Nigeria, Ethiopia and East Africa have been able to accelerate growth out of their own power. A growth rate of 6 per cent means that the total economy will triple in two decades. That is the fastest transformation out of poverty that humanity has ever experienced. India needs large sums of money for modernisation of the Armed Forces. While it needs to increase defence spending from the current 1.7 per cent of the GDP to around 2.5 per cent, the GDP increase will help increase the total Capital outlay. An honest modern digital economy will certainly put more bucks in the government coffers and thus available for national security apparatus. It will also improve India’s ability to negotiate defence deals form a position of strength. Significant increase in ‘white’ money will also boost the Make-in-India defence production. Demonetisation is thus a win-win first step for national security.

February 2017

Defence AND security alert

demonetisation HAMMERING TERRORISM AND FAKE CURRENCY

Decapitation In One Stroke Demonetisation was highly effective and served a useful purpose. The demonetisation action has blocked several problematic areas with immediate effect but without use of force. Such a tough and challenging decision taken by Government followed by effective and flexible execution is being appreciated by a majority of people within the country and also at various forums at international level.

emonetisation is NOT new in India. The highest denomination note ever printed by the Reserve Bank of India was the `10,000 note in 1938 and again in 1954. But these notes were demonetised in January 1946 and again in January 1978. However, these demonetisations had very limited effect since hardly 5 per cent to 10 per cent rich

people were using these high currency notes whereas present demonetisation has largely affected a majority of people since `500 and `1,000 notes were being in circulation and contributed around 80 per cent of our trade and business. There are various views and opinions from various experts, economists, traders, common people and leaders. As I look at the whole issue, we

need to divide this into following parts as each sector has its own challenges, advantages and disadvantages to arrive at rational conclusion. The article is not only an emphasis on hammering terrorism but also various related areas which form a chain or facilitate black marketing and generate parallel economy and promote anti-government activities.

Necessity Of Demonetisation

A lot of fake currency of high value was printed outside India and pumped into the country to finance various illegal activities like payment to drug mafia, terrorism, influence various officials, political funding, land mafia, builders lobby, flooding Indian market with low quality cheap goods, gold smuggling, Naxalite activities, etc. It was becoming difficult to control at all stages. The fake currency was about to topple our economy and create total unrest and abnormal inflation and leading ultimately to the situation like the Middle East countries with full unrest and internal conflicts. One of the reasons for fake currency printing was outsourcing `1,000 and `500 notes outside India on which we had no control and one of our neighboring countries has taken advantage of this situation and started printing the fake currency for their malefic intentions. Demonetisation was the best and the most effective way to hammer fake currency and terrorism and black marketing etc. in the interest of nation.

Not much change was noticed in rupee value exclusively because of demonetisation as exchange rate of rupee value depends on countryâ&#x20AC;&#x2122;s export Secrecy Was The Prime Consideration

Before any announcement only a few persons in the country are expected to know about this in advance. At the same time, availability of supply of new currency was equally important since these notes of `1,000 and `500 covered around 80 per cent of transactions in the country and was a big challenge to the Government. All the possibilities and likely problems for common people in various sectors could have been better planned to ensure smooth supply of new currency. However, in view of various problems faced by various sectors and people, many political parties and so called experts started to protest against the Government through social media and TV channels as well as disturb parliament sessions for the whole winter season. Most of the people failed to understand the logic behind the introduction of new note of `2,000. Uniformity of supply of new currency notes proportional to the requirement could have been planned much better. Planning till announcement of demonetisation was wonderful but faced difficulties in addressing various issues of execution post demonetisation.

Internal Effect

Mukund Anu Sharma Puranik Sudden change in currency has resulted in old currency being reduced to just waste paper in the inventory of unaccounted cash or cash stored for different purpose. It has broken the back of countries and people involved in printing the fake currency, funding of terrorists, smuggling of gold, drugs, builders The writer is the Director holding hugh cash normally at Universal Engineering for heavy cash transaction, Consultants, Mumbai. He is land deals and influencing a Chartered Engineer and concerned officials. Heavy an expert valuer of plant cash held by political parties and machinery. for election expenses and votes are severely affected. Stone pelting, Naxalite activities, cross-border terrorism have been reduced substantially. However, there will NOT be much effect on rupee value in the international market as it solely depends on the GDP Export of country in comparison with Import of the country. Making most of the money accountable and the government collecting good amount of taxes will help to improve the GDP to some extent but will hardly affect exchange rate.

Terrorist Logistics Affected

Most of the arms and ammunition used for terrorism are purchased in the international markets through dealers and most of the purchases are made against the US dollars. However, in order to generate the dollars, most of the time fake currency is used for conversion. Countries sponsoring terrorism never use their own money to convert into dollars to buy and supply arms and ammunition to terrorists. Local people involved in supporting terrorism also need a lot of cash for various logistics support, travel, stay, influencing at various levels and also heavy rewards to local people supporting these activities. This was all going on through fake currency. It was very difficult to control these activities at every small level and it was also burdensome to the government for additional manpower, investment, training without

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demonetisation HAMMERING TERRORISM AND FAKE CURRENCY guarantee of results to fight out terrorism. Even convicted terrorist of the 26/11 Mumbai attack also took four years to be hanged. Demonetisation was something like cutting off the stem of the tree so that the whole tree falls down. Demonetisation has suddenly hammered the root cause of terrorism and broken its back. This may not be the permanent solution as anti-national elements will try to do something again to restart their activities but in view of some of the security features in new notes it becomes next to impossible for them to copy and reproduce the fake currency in a short time. As per an understanding, given currency printing will be within India which makes it further difficult to produce the exact dye, ink, security chip and incorporate security features while printing fake currency at least for the next few years. This period will also help the government to make foolproof arrangements to stop the infiltration along the border. In the light of restricting financial support of Indian currency for welltrained terrorists, they cannot come to India and are likely to create their activities at other places as guided by their bosses towards other bordering States. If these terrorists are kept idle with no work of violence for more days then they will revolt in the country where they are living at present. This effect will be known in the next 6 to 12 months. Terrorists have strong network at various places and use fake currency to support these activities as well as promote at other places. Demonetisation has suddenly stopped all such activities at least for a few years till anti-national or enemy elements succeed to print fake currency of new notes.

Some paid media were just bent upon projecting how the Government actions were wrong Rupee Value Stable

Though it has resulted in long queues before banks and ATMs and people were, it has also forced many people to use credit or debit cards and bank transactions have increased. Lots of new applications of transfer of money from mobile have been developed. Lots of new developments and new opportunities to improve this

Demonetisation has led to a drop in the rupee value

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system have opened doors to online banking. People are noticing very good response from the government officials without harassment. People will be able to avoid heavy cash transactions with builders and also to buy land without much complexity. Real estate rates started declining. There were less tendency of hoarding. For marriages scheduled in November and December 2016, they had to face big difficulties as cheque payment was not possible at many places since all of us have been used to cash transactions. Same was the case for people whose relatives were in hospitals other than the government hospitals and they badly wanted to use old notes or cash to clear the bills. The government has addressed some of these issues and modified the rules to some extent. However, not much change in the rupee value was noticed exclusively because of demonetisation as exchange rate of rupee value depends on countryâ&#x20AC;&#x2122;s export against imports made. This also is dependent on the GDP of the country. Though most of the transactions after the demonetisation will be covered under banking sector with good revenue to the government and it will help to increase the GDP but it will take some time to increase rupee exchange rate with good rise.

Foreign Trade And International Players

There were no issues and problems with these sectors but they were affected because their agents appointed in India were helpless to get them the desired results because of demonetisation. Machinery procurement under global tender and various issues of agents have been explained in detail in my previous articles of DSA in April 2014 and May 2016. All these agency companies are hardly able to push their manufacturers and facilitate them for L1. To this extent, business of some foreign manufacturers have been affected. Make in India is another challenge for these sectors as this has prevented them from quoting abnormal pricing and forming cartel among them. However companies with monopoly in their products are hardly affected.

Media

Media played very crucial role in the post demonetisation period. Channels that were giving facts also showed various advantages of demonetisation as well as these channels also brought forwarded some critical issues in post-demonetisation period and facilitated the government to amend some rules, relax some rules, etc. However, some paid media were just bent upon projecting how the government actions were wrong and all the news were only in favour of oppositions and continuously brainwashing people against the Government showing some stray incidents repeatedly whole day. They also used selective people in debate and rarely allowed a government mouthpiece to put forward their views or justifications. Demonetisation was highly effective and served a useful purpose. It has already started generating good results. One demonetisation action has blocked several problematic areas with immediate effect but without use of force. Such a tough and challenging decision taken by the government followed by effective and flexible execution is being appreciated by a majority of people within the country and also at various forums at international level.

demonetisation PARADOX OF SUPPORT IN HARD TIMES Vice Anu Admiral Sharma Arun Kumar Singh (Retd)

Impact On Economy And Security With the economic growth slowing down (even the President mentioned this aspect on 5 January 2017), the primary question is, how soon can re-monetisation be completed, so that the economy starts growing at over 7 per cent again and Foreign Direct Investment (FDI) starts flowing in?

February 2017

The writer was trained in the former USSR on nuclear submarines and missiles. His appointments included, ACNS (Submarines), Flag Officer Submarines, Flag Officer Commanding Eastern Fleet, DG Indian Coast Guard, C-in-C A&N Command and finally C-in-C Eastern Naval Command. He retired in 2007.

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demonetisation PARADOX OF SUPPORT IN HARD TIMES

had penned this article and emailed it to the editor in early January 2017. So, by the time it would come in print in February 2017, the Finance Minister would have already presented his budget on 1 February and the RBI would have perhaps indicated how much has been the real impact on the economy in terms of GDP loss, black money unearthed etc. Nonetheless, I would remind readers that for the last four years under the UPA-2 and NDA governments, the annual Defence budget has been pegged at a miserly 1.7 to 1.8 per cent of the GDP ie below US $40 billion. Last year, the Defence Minister artificially 'increased' the defence budget from US $37 billion to about US $52 billion, by simply adding the pay and pensions, thus reversing the policy of late Prime Minister Rajiv Gandhi, who during his tenure in office (1984-89) had removed pay and pensions from the defence budget in view of criticism from western aid giving nations that India was spending too much on defence. This article will analyse the process of demonetisation and its impact on economic growth, employment and national security (terror, counterfeit currency, defence budget).

Majority With Modi

In my opinion, over 70 per cent of the people of India support the demonetisation process which began with a dramatic flourish on the night of 8 November 2016, with Modi’s address to the nation. And, if initial pre-poll surveys are to be believed, the BJP is expected to win the Assembly polls in the all-important state of UP and also Goa during assembly elections in five States (I expect it to also win in Punjab, Uttarakhand, Manipur) to be held from February to March 2017, despite the hardships borne by the poor. Media reports indicate that over 97 per cent of the demonetised money has been deposited in banks. Of course, the banks would have initially filtered out the counterfeit currency and will now go through the detailed task of filtering out the black money from the deposits and recover some more income tax dues, which noted economist Mohan Guruswamy estimates could be as high as `2.4 lakh crore (‘The cost and consequences of demonetization’ in the Asian Age of January 2017) as against his estimate of 2 per cent loss to GDP of `3 lakh crore and `40,000 to `50,000 crore for printing

Cashless economy or online transactions have been popularised afer demonetisation

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of new notes and at least 220 million daily wage earners have suffered loss of work. At a time, when India needed to create 15 million new jobs annually to cater for its 50 million unemployed and another 10 million joining the ‘unemployment list’ every year, this loss of jobs by 220 million poor people presents a very serious challenge to law and order, and also national security.

Paradox

A more optimistic estimate would be 1 per cent loss to GDP ie `1,50,000 crore but the pain has been enormous to the poor, most of whom who will still vote for Modi. To comprehend this paradox, one must understand the passive mindset of the majority of poor Indians who have suffered silently over centuries of tyrannical foreign rule and even as ‘recently’ as 2008, endured numerous Pakistan-sponsored terror attacks on Indian cities, culminating in the carnage of 26/11 due to the seaborne attack on Mumbai, and yet voting the ruling Congress -led UPA to power in the 2009 elections. The masses, finally voted the UPA out of power in 2014 elections, after Modi successfully convinced the poor that he would not allow the massive scams of UPA-2 to be repeated and would bring back black money. No one can deny that Modi is a unique politician in post-Independent India, a master orator with phenomenal stamina for working long hours, a clean image (no scams have yet been unearthed in the 30-odd-months of NDA rule) and someone who, being a grassroots politician has his pulse on the emotions of the masses . So, why did the astute Modi go in for demonetisation, without thorough planning, when he should have been fully aware that India has a sad record of good ideas going awry due to poor

Aid to terrorists and stone throwers in Kashmir has dried up but these are all temporary respites planning and implementation, from an unaccountable bureaucracy (the 2010 Commonwealth Games fiasco is well known)? Why did he not ensure that enough `100 notes had been printed and that the new `2,000 and `500 notes were compatible with the existing settings of over 2,00,000 ATMs? Was the move meant to cleanse the black money hoarded by some political parties, for use in the February 2017 State elections? Lost Economic Momentum? Also given the large amount of new currency being nabbed post-demonetisation by the Income Tax and ED authorities, it is clear that some unscrupulous bankers too had decided to make some ‘easy money’, and here too, Modi has risen higher in the eyes of the poor, by his relentless drive to nab the corrupt. So, while the BJP has gained politically, has the nation lost its ‘economic momentum’ apart from losing its top spot as the ‘fastest growing major economy’? The 6 January 2017 announcement, reducing GDP growth for 2017 to 7.1 per cent of GDP (from the earlier

7.6 per cent), based only on pre-demonetisation data upto October 2016, appears to be preparing the public for further bad news after the demonetisation data is finalised. The answers are being debated by noted economists and bankers, each giving his or her views based on individual ideological convictions. And as always happens in India, the truth perhaps lies somewhere in between and the final answer may have to await the new budget on 1 February, the expected act against benami property deals and GST. During his address to the nation on 30 December 2016, it was clear that PM Modi had fully grasped the enormity and repercussions of the demonetisation process that he had started on 8 November and he did announce some urgently needed mitigating measures, restoring lost jobs and creating millions of new jobs annually, should be a very high priority for the government. There is no doubt that the demonetisation has had some ‘speed-breaker’ impact on terrorist activities in Kashmir, the Maoist movement, black money, counterfeit money coming from Pakistan, etc.

Pak Fake Note Press Shut Down

Media reports indicate that the counterfeit currency press in Quetta (Pakistan) has stopped printing fake notes, till Pakistan figures out how to overcome the additional security features in the new `500 and `1,000 notes. Similarly, aid to terrorists and stone throwers in Kashmir has dried up. But these are all temporary respites and our security-cum-intelligence agencies have to be pro-active to prevent resurgence of these nefarious activities. Despite the brave talks by ministers, shifting to even a 40 per cent cashless digital economy from the present 18 per cent credit or debit cards, internet banking, NEFT or SWIFT and mobile phone wallets will take upto five years, assuming a dramatic rise in electricity supply, internet connectivity and a strong organisation to prevent and counter cyber fraud. Despite some contracts being signed for a few French Rafale jets and 155 mm lightweight American guns, and announcement of the DRDO’s 155 mm gun trials, the Indian military is in dire need of new equipment to replace its obsolete hardware, while the ‘Make in India’ defence plan

has yet to takeoff. The three services urgently need 900 helicopters of various types, the Air Force needs 200 new fighter jets, the Army needs hundreds of 155 mm artillery guns, infantry rifles, air defence systems, night vision equipments while the Navy is in dire need of conventional and nuclear submarines and MCMVs (Mine Counter Measures Vessels). This would mean an additional US $25 billion for the defence budget annually for the next five years, simply to replace obsolete equipment. My own estimate is that, given the expected burden of demonetisation and a declining GDP, when taken with the costs of OROP (One Rank One Pension) and the 7th Pay Commission, the Defence Budget is unlikely to see any significant, meaningful rise. All this at a time when the threats from terror, Pakistan and China are increasing, with Chinese warships and submarines prowling the Indian Ocean and Chinese naval-cum-airbase coming up in Gwadar (located on the Baluchistan coast, just 380 nautical miles from the strategic Gulf of Oman, through which the oil flows to countries like India, China and Japan).

Re-energise Economy

Given protests by some opposition parties, it appears that a large amount of money kept for use in the forthcoming assembly polls in five States has become ‘worthless paper’ or has been deposited in banks with little left for ‘wooing the voters’. Maybe, the forthcoming February elections will be relatively ‘clean’, but with the economic growth slowing down (even the President mentioned this aspect on 5 January), the primary question is, how soon can re-monetisation be completed, so that the economy starts growing at over 7 per cent again and Foreign Direct Investment starts flowing in? The respite from terror and counterfeit currency is temporary, millions of poor need re-employment and the military needs urgent modernisation. To add to India’s problems, oil prices are rising and President Trump after his inauguartion on 20 January 2017 is expected to make policy changes which will impact the global and Indian economy. Some carefully planned and innovative solutions are the need of the hour and PM Modi has the people’s support to go ahead.

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demonetisation EFFECT ON DEFENCE SECTOR

It Can Bear The Brunt Defence-spend is often seen as an engine of growth. While this may or may not be true, there is no denying that in the prevailing circumstances when the manufacturing sector is contracting, sales are down and jobs are in jeopardy, the MoD could step in to arrest this trend.

emonetisation of high value currency notes on 8 November 2016 took the country by surprise. Almost 85 per cent of the currency in circulation became illegal tender overnight. Though there has been a considerable let up in its chaotic aftermath, demonetisation continues to draw sharp reactions from ideological bigots to political pacifists, intellectually endowed to intellectually challenged and from the richest to the poorest. While everyone has an opinion on the issue and only time will tell how it pans out in the long run, there is no denying that the immediate impact of demonetisation has caused distress all around, both at the macro as well as the micro level. The economy has taken a hit and so has the common man on the streets.

Declining Growth

Almost two months after the demonetisation, the Economic Times reported on 3 January 2016 that the economists have revised the growth estimates to 7 per cent for the current year which is a good 0.6 per cent less than the actual growth of 7.6 per cent recorded last year. Much of this is being attributed to cash crunch which has indeed disturbed expenditure patterns of the industry as well as the consumers, resulting in worrisome contraction both in manufacturing and investment. It might be a temporary phase and the long term impact of demonetisation on the economy may indeed be positive but, if nothing else, events of the past two months have shown that one must be prepared to face the most unlikely and unforeseen situations.

As an important constituent of the government that accounts for approximately 18.60 per cent of the total Central government expenditure for the current fiscal, should the Ministry of Defence (MoD) be worried? And if so, what should it be worried about? What can it do to mitigate the hardships, if any, resulting from the demonetisation? What can it expect in the long run? For 2016-17, the total budgetary allocation to be managed by the MoD adds up to a whopping `3,67,564.82 crore. There are three important cash -centric constituents of this outlay: pay and allowances, pensions and other operational expenditure. The first two have a direct bearing on the households that are dependent on monthly payouts from the defence budget.

Veteran Pensioners Vulnerable

While the comparatively younger lot of the serving employees is better placed to cope with the hardship of standing in queue in front of the banks (now diminishing by the day) or visiting the ATMs, often lying deserted for want of cash in the machines, the pensioners â&#x20AC;&#x201C; some of them very old and infirm, probably even staying alone â&#x20AC;&#x201C; could be more vulnerable. The outlay for the current year for paying salaries of the serving personnel of the Armed Forces and those employed in the ordnance factories and the DRDO (Defence Research and Development Organisation) alone is `1,14,086.14 crore. This does not include the wages paid to the personnel serving with organisations such as the Military Engineer Service, Coast Guard and the Border Roads Organisation.

Responsibility for minimising cash transactions in government dealings must be borne by large spenders such as the defence and railways Add to this, `83,332.82 crore allocated for defence pensions and one would be looking at a formidable figure of nearly `2 lakh crore. Much of this would have been disbursed during the first eight months of the fiscal before the demonetisation but at least one-third of it was still left to be disbursed in the remaining four months till the end of March 2017. Could this pose a problem? Not really. There was a time when most of the employees preferred to receive their salaries in cash. Even the pension used to be disbursed in cash. But over the years things have changed dramatically. Fortuitously, most of the serving personnel and pensioners have stopped drawing their salaries and pensions respectively in cash. Consequently, disbursement is unlikely to have created any difficulty in the months following the demonetisation and would certainly pose no difficulty in future.

Contract Labour Hit

But some concerns remain. For one thing, there is a sizeable cash-dependent chunk of contract

labour employed by the Amit AnuCowshish Sharma contractors executing civil works for various defence establishments. Such labour force is also employed by shipyards, depots, workshops. In fact, the Border Roads Organisation is heavily dependent on hired labour to a very large extent. It is this category of individuals, operating on the periphery of The writer is a former the defence establishment, Financial Adviser which could be vulnerable (Acquisition) and for many of them are migrant Additional Secretary, labourers who do not have Ministry of Defence. bank accounts to which their He has been associated wages could be transferred. with defence planning, As the worst seems to budget, revenue and be already over, one can capital procurement and presume that the immediate other matters concerning crisis has been averted but financial management in long term solutions have to defence. He is presently a be found for dealing with Distinguished Fellow with the Institute for Defence this problem. The ongoing Studies and Analyses, situation provides a good New Delhi. opportunity to do so. The government could consider adopting a no-cash-payment policy. This implies that no payment on account of pay, allowances and other personal claims will be made in cash, even to the labour force. Some organisations follow the practice of the in-house cashier drawing cash from the bank to pay advances of various types to their employees. This too must stop.

Bind Contractors To Banking

The contractors who hire the labour to execute government contracts could be bound by the terms of the contract to ensure that those hired by them have a bank account and that they are paid through bank transfer. This may sound unreasonable but in the long run, this will eliminate some of the most undesirable practices in disbursement of cash, encourage savings and give a fillip to the idea of a digital India. Some would argue that such a policy would strike at the employeesâ&#x20AC;&#x2122; rights to receive payment in cash. This would be a specious plea. The employees, as indeed pensioners, have the right to receive the payment but not to choose the mode of payment. The government would be perfectly within its rights to bring in such a policy with an enabling provision to facilitate cash disbursement in exceptional situations. Petty payments could also be allowed to be made in cash in exceptional circumstances. This will bring down, if not eliminate, handling of cash in government offices, which is anyway fraught with an element of risk. This will obviously place some strain on the individuals but that strain would not be any different from the strain that the common citizens of this country have faced or might continue to face in future. The idea that those who serve or have served the government are

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demonetisation EFFECT ON DEFENCE SECTOR more privileged than those who are not a part of the large work force of the government is anachronistic.

Purchase Of Equipment

The second large chunk of expenditure incurred by the MoD is on account of revenue and capital purchases. The allocation for capital acquisition for the three Services alone is more than `70,000 crore for the current fiscal. In addition, another `25,000 crore is allocated for procurement of stores and equipment from the revenue budget. These figures, which add up to almost one lakh crore rupees, do not take into account the allocation for such purchases by other organisations, such as the Coast Guard and the Border Roads.

There are three important cash-centric constituents of this outlay: pay and allowances, pensions and other operational expenditure The remaining amount of the total allocation under all the four Demands for Grant of the MoD, which will be more than `60,000 crore, is spent on a plethora of operational and other requirements, ranging from transportation of goods and personnel to procurement of stock-in-trade by the Canteen Stores Department, maintenance of infrastructure to ensuring serviceability of equipment and weapon systems, and from disbursing grants-in-aid to making other miscellaneous payments. Disbursement of such a huge amount could be

problematic, but again, fortuitously most of this amount is also paid to the Indian and foreign vendors, as also other agencies and individuals providing various types of services, through the banking channel and not in cash. The cash payment, wherever it may still be taking place, would be limited to cash-andcarry purchases. Such purchases are very limited in number. As most of these purchases are also anyway made from established sources, it will not be impossible to institute a mechanism to make payment to them in future through means other than cash.

Smart Cards

An idea that needs serious consideration is to provide official smart cards down to the unit level to be made use of for making petty payments at the points of sale. Cards with limited credit limit will minimise the risk and the hassle of handling cash transaction. Minimising cash transactions by the government departments will go a long way in promoting the idea of a cashless society and digital India. The responsibility for minimising cash transactions in government dealings must be borne by large spenders such as the defence and railways. But the task does not end with this. Defence-spend is often seen as an engine of growth. While this may or may not be true, there is no denying that in the prevailing circumstances when the manufacturing sector is contracting, sales are down and jobs are in jeopardy, the MoD could step in to arrest this trend. If nothing else, acceleration in civil infrastructure projects, maintenance programmes and even procurement of stores manufactured by labour intensive units would help in stabilising the present situation which has been dwindling.

People standing outside ATMs during the demonetisation drive

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demonetisation BEWARE RETURN TO SQUARE ONE

Short-term Gain Must Be Extended Over Time

here is no doubt that demonetisation announced by Prime Minister Narendra Modi on 8 November 2016 has caused severe damage to agents of destabilisation both in India and elsewhere. The three major areas affected are (a) Left Wing Extremism (b) Pakistan-sponsored terrorism and insurgency in Jammu and Kashmir and other parts of India, and (c) Northeast insurgency. The after effects have also been felt in Pakistan, Nepal, Bangladesh and Myanmar where Indian currency has been in use

Pratap Anu Sharma Heblikar

The writer is Managing Trustee of Institute of Contemporary Studies Bangalore (ICSB) and a former Special Secretary, Government of India.

for over several decades and especially for nefarious purposes. In one stroke, major disturbances are seen in clandestine money markets in our neighborhood and its immediate concentric. There is no good news for the merchants of death since more such doses are in offing. From the text and tenor of Prime Minister Modiâ&#x20AC;&#x2122;s recent statements on this subject, it is increasingly evident that the Central government is determined to take the war on terror and terrorist funding to next level and more action can be expected sooner than later.

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demonitisation BEWARE RETURN TO SQUARE ONE Initial results have underlined immediate impact on insurgency and allied activities. Minister of State for Home Affairs, Kiren Rijiju on 17 November 2016 revealed that over `800 crore was lost by the three anti-national groups since the November 8 demonetisation. Elaborating further, the Minister added that the northeast groups and the Left Wing Extremists incurred major losses over `780 crore, whilst the Pakistan supported elements such as Lashkar-e-Toiba, Jaish-e-Mohammed and the Hizb-ul-Mujahedin accounted for the rest. He also revealed that over `400 crore worth of Fake Indian Currency Notes (FICN) had been wiped out of circulation since the note ban. Dr PV Ramana, Senior researcher at the Institute of Defence Studies and Analyses (IDSA), New Delhi, an authority on Left Wing Extremism (LWE), has written a brilliant article entitled Big Blow To Maoist Finances in Telangana Today (16 December, 2016) on terrorist funding. He estimates that the Maoist kitty to be in excess of `3,800 crore collected through various means. He has assessed that the demonetisation has created a temporary setback to them in short term and they are expected to recoup the losses through extortions and familiar methods. He has warned of more extortions, kidnapping and violence by the Maoists to recoup lost finance, this could well be true of J&K and the Northeast region.

Northeast Phenomenon

Manipur is another area for study of terrorist funding. It is acknowledged that insurgency is a thriving industry there and has severely affected the body politic of the State. Terror, extortion, kidnapping, arms and drug smuggling are its outstanding features. Central Intelligence agencies have compiled reams of information on sources of terror funding and extensive use by anti-national elements for their nefarious activities. Added to it are reports of direct funding by ‘inimical foreign Intelligence agencies’ for conducting anti-India activities. While there are no confirmed figures about the northeast regions ‘insurgency terror chests’, private estimates assess that the figure could be in excess of hundreds of millions of rupees necessary to defray the upkeep costs of foot soldiers, over-ground workers, sympathisers, logistics, arms and ammunition, propaganda and other activities. Manipur has many major and minor underground groups and these present a major challenge to the government. Demonetisation may have had marginal impact on their financial fortunes. However since the lines of funding are well established, it is possible that efforts may be underway to replenish their losses. A study is necessary also to determine the fate and whereabouts of large stocks of Indian currency held in foreign sanctuaries by not only Manipur groups but also those of Assam, Nagaland and Meghalaya, especially the prominent ones such as the United Liberation Front of Asom (ULFA) and the Nationalist Social Council of Nagaland (NSCN-I/M).

KRC Study Of Internal Security

The Kargil Review Committee (KRC) report has dealt extensively with the subject of internal security management and made several recommendations with far-reaching consequences. The KRC report is unique in

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the sense that it was the first ever comprehensive review of national security management since Independence by the highest political levels in the country. It made critical references to the Fake Indian Currency Notes (FICN), benami and hawala transactions, drug smuggling and other activities as tactical tools being utilised by anti-India elements with the assistance and support of State and non-State actors. A number of measures were recommended by it to contain this threat. A study of the KRC report is both educative and instructive to students of national security management. Quite clearly, it underlined the need for a bipartisan approach in this direction.

Prevent Resuscitation

Demonetisation measures can be considered as a major assault on terrorist organisations and private militias in the country. Experts advocate the need to continue sustained operations especially to pre-empt anti-national elements from regrouping or finding the alternative methods to make up losses. The destruction of terrorist networks and elimination of their sources of funding is another item of national priority. Maximum damage on the perpetrators by the Central government in tandem with the States and union territories is another tool for consideration. While human intelligence is important, the role of technology must be highlighted especially cyber warfare capabilities. It must be increasingly deployed to give the law enforcement agencies and others, the ability to detect, deter and destroy terrorist networks to maximum extent possible.

It is acknowledged that State police organisations are the weak link in the internal security management Past experience has shown that most of the Indian insurgent groups and terrorist organisations are vulnerable to concerted military-led operations. This weakness must be fully exploited. It must be said with pride that the experience and expertise of our Central Police, Organisations, Central Armed Police Forces and Intelligence agencies has kept the situation under control to a large extent. The role of the military is equally important. This has no parallel elsewhere. With more technical interventions and modern forensic tools, the results will show manifold improvement. The Western agencies point out that the results arising out of concerted action to choke financial sustenance has caused extensive damage to the supply-chain of terrorist networks. This is an important anti-terrorist tactical weapon for use by the authorities. Well-planned and clinically executed operations leading to denial of funds which will in turn certainly cause serious morale and disciplinary problems within ranks of these groups. Speaking at the 11th meeting of the Inter-State Council on 13 July 2016, Prime Minister Modi requested the States to focus on Intelligence sharing to keep the country updated on challenges to national security. This was the first time since 2006 that internal security

figured in the agenda of the Inter-State Council. Former Prime Minister, Manmohan Singh did make a passing reference to the subject in his address to the Inter-State Council in 2011. It is acknowledged that the State police organisations are the weak link in the internal security management and the ‘law and order’ responsibilities have been overtaken by challenges from ‘State’ and ‘nonState actors’. Consequently, the distinction between external and internal security has blurred with the Central government taking on more responsibilities. This breach is being exploited by anti-national elements, who do not recognise state boundaries. There is no doubt that a central agency will prove to be a game changer in meeting challenges from terrorist and allied networks.

Refurbish NCTC

Creation of the National Counter Terrorist Centre (NCTC)is the need of the hour and any further delay would be counter-productive. It must have the primary mandate to deal with asymmetrical threats to national security. The present government and its predecessor have acknowledged the need for such an agency, which is itself an admission of political consensus on the subject. Political will is necessary and common grounds can certainly be found for it. The manner by which the Goods and Services Tax (GST) bill received parliamentary approval recently and approbation by several States is a precedent worth emulating in the case of the NCTC. To avoid acrimony over its command and control, the NCTC should be headed by a Retired Supreme Court Judge with an oversight mechanism and its personnel drawn from all walks of life. If terrorism and its ilk are to be controlled and eliminated then national consensus is crucial requiring the participation of and all our 28 States and seven Union Territories in making it a reality.

Threat From Human Trafficking

While ‘war’ on conventional security threats continue, it is time to focus attention on insidious threats emanating from Human-trafficking. It has so far remained below the radar and eluded concerted action and left unattended it can cause serious challenge to national security and social fabric of the country. Trans-border human smuggling from Bangladesh into Bengal and Assam has assumed serious proportions especially the ease by which such activities take place. This is more so in the case of women and the girl-child, who are sold into prostitution at exorbitant costs and fees. The network is effective across the length and breadth of India with extensive influence in our neighboring countries. The supply-chain is well established and catering to major metropolis but also Tier-I and Tier-II cities. The entire process is based on black money and other forms of payment outside the legal system. Human trafficking from Nepal and the Northeast region too have similar patronage on pan-India basis. The clandestine network needs to be studied and challenged. The investment in this trade is running into billions of rupees. It is no different than the pattern employed by arms smugglers and drug mafia. Experts state that black money has underwritten this activity and its financial costs are inestimable. In the process, they have suborned existing systems to great advantage. The role of the States and Union territories in winning this battle is very important and they have equal responsibility. This challenge should be met by the proposed NTCT. There is no doubt that demonetisation has created severe disruptions in activities of terrorist networks across the country in the short term. The lessons learnt from short term gains need to be implemented with specific time lines in a relentless manner. Efforts must match and exploit the success achieved so far, otherwise it will be back to square one.

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demonetisation MEANS TO AN END

A Surgical Strike On Terror

Demonetisation is just a means to the end, not an end in itself. It is extremely important that the dismantling of terror networks is sustained and not allowed to precipitate again in the near future. Knowing very well that cash is not the only means of financing terror, it is imperative to attack the other pillars.

he date of 8 November 2016 can be termed as a watershed in the economic trajectory of India since Independence. With one fell swoop, Prime Minister Narendra Modi decided to withdraw the legal tender status of close to eighty six per cent of the currency circulating in the economy in

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the denominations of 500 and 1,000 rupee notes. This colossal policy was bound to drive the largely informal economy into disarray. It is not as if demonetisation hadnâ&#x20AC;&#x2122;t been attempted before 2016. But the chaotic impact, this time around, was largely a result of two factors: the denominations repealed were the primary

medium of transaction and that a large section of Indian employees (in the informal sector) are paid in cash. As a result, normalcy could be restored only after a few months time. The Prime Minister himself requested for fifty days before things could be returned to normal.

Justifications

The Government’s justification for this unprecedented move was more than one. Not only did it seek to eradicate the scourge of black money and corruption but the move was also aimed at dismantling the terror network, operating both from outside and within the country as also by choking its avenues for financial accessibility. The Defence Minister of India, Manohar Parrikar, called demonetisation a surgical strike against a vicious tripartite nexus of terrorism, fake currency and narcotics trade. The relationship between fake currency and terror funding in India is a longstanding one. In August 2013, a Lashkar-e-Toiba terrorist nabbed by a special team of Delhi Police had divulged information pertaining to the ISI’s involvement in printing fake currency in Pakistan and using it as an efficacious tool to fund terrorism in Jammu and Kashmir, and the other Indian States. The ISI has been pumping huge quantities of fake currency to pay for anti-national activities in India from Nepal, Bangladesh, Sri Lanka, Thailand and some other countries. An important analogy to understand the dangerous consequence of this nexus would be to look at the 26/11 attacks from the economic point of view. Only eighty lakh rupees in fake currency was enough to pay the terrorists to keep India’s financial capital hostage for three consecutive days. Eighty lakh rupees may be a small proportion of the total currency valuation in the economy. But irrespective of the proportion, fake currency is certainly a threat to the national security of India. During the Second World War, the British government had to withdraw many of its currency units in circulation as a result of Hitler’s tactic of injecting fake currency into the British economy in order to cripple it.

It choked the funding of the Hurriyat Conference which has brought down the Kashmir violence by 60 per cent Terror Funding

Taking out 500 and 1,000 rupee notes out of circulation will have a lasting impact on the syndicates producing the Fake Indian Currency Notes (FICN), thus affecting the funding of terror networks in Jammu and Kashmir, the North-eastern States and the Naxalite hit States. The insurgent and terror groups use various means including hawala transactions, extortion, ransom kidnapping and most importantly, direct use of fake currency for financing their illicit activities. The effects of the latest demonetisation drive indicate that the entry of the FICN has been severely hit. The outcome is explicitly visible after it choked the funding of the Hurriyat Conference

which has brought down the Kashmir violence by 60 per cent. The cash held by the terrorists have turned into pieces of paper of no value. Due to frustration, there have been reports of significant increase in bank robberies by the militants in the valley. Also, both the State actors and the non-State actors of Pakistan have shut their the FICN shops, which have been supplying the FICN to the Kashmir valley. The FICN is one of the important profit earning tools for the ISI. It is roughly estimated that the ISI made 5 billion rupees of profit using this channel last year. The profit earned is further invested to infiltrate Jaish and Lashkar terrorists into India thus completing the vicious cycle of terror funding. Therefore, it is safe to argue that demonetisation has indeed dealt a considerable blow to the economic terrorism that has been directed at India for a while now.

DrAnu Harsh Sharma V Pant

The writer is a Professor of International Relations in Defence Studies Department and the India Institute at King’s College, London. He is presently Head of the Strategic Studies Programme at the Observer Research Foundation, New Delhi. He is also an Associate at the Centre for Science and Security Studies and a Non-Resident Fellow with the Wadhwani Chair in US-India Policy Studies at the Center for Strategic and International Studies, Washington, DC.

Stone-pelting Devalued

The separatists in Kashmir have always kept a large chunk of their funds in cash as it makes it easier to pay for acts of violence. The Kashmir protests last year, the longest and the most exhaustive one, since the past few decades had been going on for months. It cannot be just a mere coincidence that the incidents of stone pelting and violent aggression saw a dip since demonetisation was enforced. Hawala cash transfers to terrorists and separatists in Kashmir, which were mostly made using the defunct bills, have dried up, making it harder for them to pay young people to stage violent protests. Thus, what we see is a two-pronged effect in Kashmir. On one hand, the funding of Pakistan based groups like Jaish-e-Muhammad and Lashkar-e-Toiba has been severely crippled with nothing remaining to be paid to the infiltrators. On the other hand, the indigenous separatist forces like the Hizbul-Mujahideen are also bearing the brunt as is evident from the decreasing number of activities indulged in by them.

Naxals, North-east Insurgents Bankrupt

However, it is the Naxals and the insurgents in the North-east that have been affected the most by this bold and courageous move. Groups in the North-east India and the CPI (Maoist) operating in the Naxal affected areas of the country are in total disarray and in an utter state of confusion as a large proportion of their financial reserves are held as cash. Further,

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demonetisation MEANS TO AN END investments in property will become relatively difficult to liquidate in order to recreate funds for organisational support mechanisms. Intercepts by State police departments of Jharkhand and Chhattisgarh have recorded conversations between Naxal leaders wherein they are talking about the heavy economic casualty inflicted upon them and how they have few cards left on the table. Maoists collect ‘levies’ from road contractors and big industrial houses carrying out mining activities in States such as Chhattisgarh and Jharkand, and extort – according to some estimates – up to `1,500 crore every year. Most of the cash Naxals hold are in big denomination notes which they hide deep inside

The Indian security establishment will have to remain ever vigilant against new modes of terror financing the forests, with some reports suggesting that Naxals have stashed more than `7,000 crore in Bastar region alone. Union Home Minister Rajnath Singh had hinted that Maoists, strapped for cash, had been frantically trying to swap their devalued cash. “They are trying to exchange their old notes through local contractors, businessmen and sympathisers,” he said. Indeed, unlike the Pakistan sponsored terrorism which has access to better infrastructural backing, the Naxal groups and the insurgents in the north-east shall take a long time to recuperate.

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Holistic Approach To Terror Funding

But demonetisation is just a means to the end, not an end in itself. It is extremely important that the dismantling of terror networks is sustained and not allowed to precipitate again in the near future. Knowing very well that cash is not the only means of financing terror, it is imperative to attack the other pillars. A significant portion of black money or gains from illegal activities like corruption and other crimes is invested in gold or real estate. So, the Indian government will have to target and clean up the real estate sector soon. A forensic cell, which monitors each case of counterfeit currency to better understand the technology being applied to counterfeit notes, can be established under the aegis of the NIA. Such a cell can also be effective in predicting future innovations in devising fake currency and nip them in the bud. The Indian security establishment will have to remain ever vigilant against new modes of terror financing. While the focus has largely been on Pakistan, the North-east has remained neglected. The region has time and again seen collusion between power brokers and the militant groups. This needs to be stopped. Moreover, terror groups and their sponsors will keep on trying. Currency notes of `2,000 denomination were among the items recovered from the two terrorists who were killed in the encounter with security forces in north Kashmir’s Bandipora district just days after the announcement from Prime Minister Modi. Demonetisation has certainly been a lethal salvo as far as breaking the nexus of corruption, counterfeit currency and terrorism is concerned. The government has indicated that more measures aimed at curbing corruption are coming.

demonetisation A SOLDIERâ&#x20AC;&#x2122;S TAKE

Automatic Blacklisting: Curse on Defence Procurement The bottom line is that while the demonetisation may have had plenty of downside issues not the least of them being the pain and harassment of innocent law-abiding citizens scrounging for cash and many other small time businesses which have slowed down drastically, from the soldier's point of view this bold step has rendered several positive outcomes.

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he open source is flush with articles and blogs detailing the impact of demonetisation on various sectors of economy (automobiles, cement, building material, capital goods, banks, consumer staples, jewellery, non-banking financial sectors, telecom, paints, pharma, power, coal et al) or aspects like tax collection, interest rates, liquidity and more, this brief work attempts to examine the effect of demonetisation on military modernisation and defence procurements and other areas of impact. In essence, ‘a soldier's take’. The thoughts are implied from the open source data mine or are based on experience. At the onset, it will be relevant here to recall that the Ministry of Defence on 21 November 2016 finally took out the new blacklisting guidelines referred to as Guidelines of the MoD for Penalties in Business Dealings with Entities. This indeed is a forward looking document that moves miles ahead of state of things that existed heretofore. Well, there used to be a time when the blacklisting of mainly foreign OEM (rarely Indian) was done mainly on suspicion, without concrete proof and (or) conviction. The author has seen the curse of blacklisting falling upon the procurement cases; in some cases, when the end-game was in sight after years of procedural toil in the excruciatingly slow procurement chain, merely on the complaint of a ‘rival’ which has not yet been conclusively proven.

Clear Guidelines On Blacklisting

Today, the guidelines in a clear departure from the selfdefeating exercise of blanket banning without concrete conviction, thereby inflicting the self-goal of losing out on the best of technologies, weapon systems, spare support et al, provide three clearcut options of imposition of financial penalties, suspension or banning of business dealings, that too after due conviction and concrete proof (further details not covered). While, it might be just incidental that these guidelines came into effect a full two weeks after the demonetisation announcement, these gets a positive stroke from the latter. Some details: • Out of the four sectors that got hit badly due to demonetisation, namely, human trafficking, illicit drug trade, dabba trading and satta bazaar and hawala trade, the last quoted is relevant to the issue. • Experience has it, that most of the corrupt practices, illegal payments, commissions, gratifications, etc. especially from the representatives of the OEMs take place through this route mostly in the foreign land. • With the hawala racketeers getting a bloody nose in the demonetisation bid, it will take some while before they rise again with their ill-gotten merchandise, this time, in the new currency denominations. Some jolt worth the cause! • Also relevant to note is the fact that the said guidelines are particularly unforgiving as far as the ‘agents’ of the OEM go. In that, if an agent employed by an entity has been found engaging in the acts of impropriety he or she is banned for life irrespective of the fact whether the entity under the suspension or ban comes out of the same at a point in time. Though not directly related to the demonetisation, the spirit

of the guidelines and the spirit of demonetisation, namely ‘clean-up’, actually rhymes.

Anu Lt Gen Sharma (Dr) Vijay Kumar Saxena PVSM, AVSM, VSM (Retd)

Collateral Damage

Another area that may remotely get impacted by the demonetisation is the fund flow or liquidity as related to small businesses. In the current euphoria of ‘Make-in-India’ both the public, as well as, the private industry is engaged in proactively developing an MSME (or even small time) vendor base. This is inescapable since the requirement to produce the indigenous content (30 per cent or 40 per cent as the case may be) is not only restricted to the main equipment but also spares support. It is at the lowest end of the spectrum where the problem of cash-driven liquidity may become an issue delaying flow of goods or raw materials from grassroots to higher level adding their bit to the time-overruns of the main contracts. However, the problem is only transient and is likely to disappear once the cash flow catches up. Then there is an implied issue of the value of rupee vis-à-vis the dollar as a precipitate of demonetisation and its resultant effect on the temporarily shrinking of the GDP for a finite time.

Strength Of Rupee

The writer is an alumnus of Defence Services Staff College, College of Defence Management and the coveted, National Defence College. He has served as the Additional Director General Army Air Defence at Army HQ and as the Commandant of the prestigious Army Air Defence College. He is the only Army Air Defence Officer to have had the privilege to Command the Army Air Defence College for the second time. Decorated thrice by the President of India, the General Officer took over as the Director General Army Air Defence on 1 July 2013, from where he superannuated on 31 May 2015. Post superannuation, he has been re-employed as Adviser in Bharat Electronics Limited, where he is facilitating many an ongoing project towards their completion and rendering other knowledge-based services.

According to the open source, the rupee became weaker by 2.66 per cent against the dollar in a period of 26 days post the ban (from 66.40 to 68.17 to a dollar). A study of the changing strength of the Indian rupee shows that in the period between 8 May 2016 to 8 November 2016 rupee became stronger than 125 currencies and weaker than 32 currencies, however in the short time window from 8 November 2016 to 28 December 2016, it became stronger to only 60 currencies and became weaker than 96 currencies1. The following points are made: • The issue of rupee has been brought in to simply draw an indirect reference to the overall value of contracts. Very simply, the weaker the rupee the higher will be the cost of procurements. 1

https://www.staisticstimes.com>indian-rupee-after-demonetisation

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demonetisation A SOLDIER’S TAKE

• It is well understood that the fluctuations in the value of rupee and its changing value day-on-day is dependent on a host of other macro-economic factors or indicators (not explained here). Demonetisation driven downslide is just one of the transient phenomenon.

•

Effect On Terrorism

Of course, the most prominent impact of demonetisation is on effectively putting a brake on the high tide of terrorism complete with its dramas of unrests, bouts of stone-pelting by paid (hired youngsters) and an unending stream of fund-flow to procure arms, ammunition and other war-like stores by the sources inimical to the nation. The Hon’ble Defence Minister has rightly called demonetisation as the PM’s surgical strike on black money, terrorist funding and drug money2. While the opponents (political) of the idea will have us believe that most of the terrorist funding is digital, the definite positive signs speak some other language. A snapshot:

- - - - - -

Disruption Of Left Extremist Funding

• According to intelligence inputs, left wing extremism has been hit the hardest by the note-ban. • Up to 584 Maoists have surrendered in the four weeks following 8 November 2016. On this very day some 469 cadres did so. • The Union Home Minister has said that the Maoists are strapped for cash and are running from pillar to post to swap their de-valued cash. They are trying to exchange their old notes through local contractors, businessmen and sympathisers. • The Deccan Herald reported on 15 November last year that there has been a drastic reduction

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in the stone-pelting incidents in the Kashmir valley post de-monetisation. Probabaly the recruiters are out of cash to ‘hire’ the youth for the nefarious act of stone-pelting. An employment avenue dried out (sic)3. Times Now reported on 7 January 2017 that as per their analysis, there has been a 60 per cent reduction in violent incidents since demonetisation. It has said the following: On day 55 after 8 November, there has been a major impact on terror funding and counterfeit currency production4. There has been a massive drop in acts of terror post demonetisation. Areas controlled by left wing extremists have also been impacted due to currency ban as most of their funding happens through extortion. `90 lakh of currency has been seized from Maoist cadres. Procurement of weapons by the Maoist groups has sharply come down. Since extortion and kidnapping for ransom is transacted through cash, demonetisation has severely impacted the finances of these groups.

The bottom line is that while the demonetisation may have had plenty of downside issues not the least of them being the pain and harassment of innocent law-abiding citizens scrounging for cash and many other small time businesses which have slowed down drastically, from the soldier's point of view this bold step has rendered several positive outcomes. 2 3 4

https://www.timesofindia.indiatimes.com https://www.deccan Herald.com https;//www.timesnowtv.com

demonetisation NEW GAMECHANGERS

Impact On The Defence Sector Will DeMo then have any effect on the Defence Sector? Well yes, a positive effect. The increased budget allocation for the Defence Ministry with an earmarked allocation for defence modernisation and MAKE programmes, the innovative funding mechanism in offsets, reduced cash availability for laundering to sustain a cleaner procurement process, increased exports, increased order flow into domestic companies under the â&#x20AC;&#x2DC;Make in Indiaâ&#x20AC;&#x2122; categories of procurement, will all actually boost defence cash flows.

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f there was one event that attracted attention it was the big announcement of 8 November 2016, viz demonetisation. It assumed centre-stage as the year 2016 came to a close after the announcement of phasing out of existing denominations of `500 and `1,000. This was a rude shock to many delivered in a gentle manner through an announcement that was to bring about a revolutionary change in terms of curbing black money and regaining a control over the economy in a very subtle manner. India as a nation was forced to reconcile to the hardship that was to follow with the changed scenario, the country was expected to see a major leap in digital payments and financial transactions over the Internet. Be prepared for the inevitable and adapt to changes. Those that were quick in adapting to changes with change in technology were less affected and the ones that kept the traditional methods of cash flows were more affected. It seems that many were quick to find interim solutions to avoid major losses in trade and cash flows, and may be few of them laughed all the way to the banks.

Global Financial Stress

The year saw a few major global events such as Brexit and Donald Trump's victory in the US elctions to become the President-elect to assume office on 20 January even when this article goes to print, which are likely to shape economic and financial trends across the world in coming months. Indian financial markets did not react sharply to these massive events to the extent that they were expected to. So, another lesson learnt would be not to plan your finances on short-term events. Instead, one should have long term financial goals and work towards them through market cycles.

Strategic Partnerships for Defence Production and the much awaited Innovative Funding Mechanism in Offsets will be the gamechangers The Defence Ministry was busy handling the OROP scheme for the Defence Forces; the dynamic political leadership saw to it that this long-standing promise made to the Forces, was taken to fructification in a relatively short period. Then there was the implementation of the 7th Pay Commission that had its own problems. The nation also witnessed Pathankot and Uri, besides many other bad skirmishes both in the North and the Northeast. There was a huge financial drain in an effort to deal with these situations. Amidst all of this was the whole concept of DEMONETISATION and its consequent impact on the economy. It is widely reported in the media that more than 97 per cent of the cash has come back into the system. Now, is this good news? Let us analyse the impact it could have in the defence sector. Defence procurements are not done in cash, fortunately. Is there a cash component somewhere? Even the MSMEs, operating in the Defence Sector, do not operate

in a cash component as their raw materials and other tools and jigs are obtained through established banking channels. The big boys in any case operate only through the banking channels and the government procurement policies have a well laid out and defined process of payments.

Dirty Money

Col KV (Retd) AnuKuber Sharma

The writer is an alumnus of the prestigious National Defence Academy and the Technical Staff College. He has specialised in Electronic Warfare. Commanded an Electronic Warfare Regiment in operations and has conducted EW operations. He has founded and established the DOFA and was the chief architect of the offset policy since its inception in 2005. He has been an Adviser with the National Small Industries Corporation and played a key role in bringing MSMEs into the mainstream defence business, through NSIC. Presently, he is an Adviser with the DRDO for Technology Acquisitions.

What about the dirty money that has plagued many a defence deal? Maybe this money has been curtailed and stopped albeit temporarily. In the ensuing two years, we can hope to see a great deal of transparency and accountability in each of the deals that are signed and executed. While the government is clamping down on the un-accounted -for money that is still at large and is also targeting the hoarders of cash, in many cases with the new currency denominations, there is yet hope that the defence deals will become free of this menace of money laundering. Defence sector reforms have had a positive impact on the growth of the sector with a great deal of energy that is flowing in. De-licencing of the sector with more than 60 per cent of the products and all of the components and accessories removed from compulsory licencing, has indeed opened up the industry gates for a larger segment of the industry to become partners with the Ministry of Defence in research, development and production. The Defence Procurement Procedures have been revised to an extent, providing a greater impetus for indigenous manufacturing while encouraging the small and medium industries for direct partnership with the government. The MAKE procedure, providing intense indigenous impact has been rewritten to give the intended fillip by encouraging industry to take up challenges and become partners with the government. This is the platform that the indigenous industry may like to exploit to derive the greatest benefit to the Armed Forces for inducting indigenous technologies and for the industry to move the business into India.

FDI Revised

The revision of the FDI policy to be in harmony with the changes in the sector has added to its potential. If there is one sector that can pursue the â&#x20AC;&#x2DC;Make in Indiaâ&#x20AC;&#x2122; policy, it is the Defence Sector and the work has begun in right earnest. Easing of norms of executing Offsets, has encouraged the foreign original equipment

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demonetisation NEW GAMECHANGERS manufacturers to look at the indigenous industry with a greater interest, more Indian companies are getting hooked up to the Offsets wagon.

Hurdles

One of the major concerns of the defence sector in so far as the MSMEs are concerned was the cash flow to enable them to be in business. This has also been addressed in the procurement policies for timely payments. Delays in payments by the payment authority to the industry is worrisome. While the foreign companies are paid through an LC, the same does not apply to the domestic companies. The domestic companies have to deal with different authorities for each part of the procurement and supplies. Initially, with the planning process for making an entry to be considered good enough for receiving an enquiry for tender (the Defence Procurement Process by and large believes in limited tendering, save some revenue procurements that are tendered openly), thereafter, with the execution process for response to the request for proposal (RFP) and trials with the trial teams of the Armed Forces and thereafter with the bureaucracy for finalising the contract. The story does not end here, the execution or deliveries are interspersed with interaction with the end user; the Armed Forces, often seeking small increments in performance (not always in the book, RFP document or contract but the supplier is obliged to support the end user both from a customer point of view as also due to a patriotic fervour).

Possible sale of the indigenous surface-to-air missile, AKASH, to Vietnam has already forced China to raise its tentacles

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Post-delivery Agony

Once the deliveries are done, the agony begins, as was highlighted by a number of suppliers in many forums, in following up with the payment authority (PCDA concerned); many a times, it could be a forever exercise, unless of course the supplier understands the dynamics of cash flow. The payment authority is not a stake holder and is generally not answerable to anyone, this can be fixed if the domestic vendors can also have their payments through a system of LC. Demonetisation may have a favourable effect in this case, since there is limited liquid cash available, with the industry, to fix and fill in the time-gaps in payments. Before full restoration of money circulation takes place, the government may like to plug these gaps through an effective mechanism as also create accountability. The DeMo story is not so rosy elsewhere. In the informal sector, experts have commented that, while this critical sector that contributes over half of India’s economic output and employs about 90 per cent of India’s 470 million workforce; they have been badly hit. According to the Secretary General of FISME, Anil Bharadwaj (as reported in the ET of 15 January), “Demonetisation has given us the biggest Jatka, for example in Yamunanagar (UP), the hub of India’s plywood industry, factories are shut. Now they have only two options: shut down or shift to the formal economy. This is however unaffordable, since thin margins and higher compliance costs render it unaffordable”. DeMo has virtually stalled the economy with a sharp dip in consumer demand and job cuts, auto sales have dipped 18 per cent in December 2016, fuel demand is expected to slow by upto 40 per cent in 2017, a recent survey by the SBI among SMEs reveals a 66 per cent dip in business; a study by SME outfit AIMO reveals 35 per cent layoffs and a 50 per cent revenue dip, investment proposals dropped to 1.25 lakh crore in third quarter of 2016 as against an average of 2.36 lakh crore. Defence sector being a strategic sector, with

well-defined rules of business, is generally ever-green and has been made greener by the effective reforms undertaken by the Parrikar led ministry. Leading from the front the minister has made an effort to revive an indigenous approach to all requirements of the Armed Forces. The announcement of Strategic Partnerships for Defence Production and the much awaited Innovative Funding Mechanism in Offsets, will be the gamechangers. This is expected soon, maybe before, the grand Aero India show in Bengaluru beginning with the Valentine’s Day for four days this year.

The payment authority is not a stake holder and is generally not answerable to anyone Budget: Less Money To Spend

What then would be the effect of DeMo on say, the budget. Media reports suggest that the GDP would grow at a maximum of 6 per cent for a few years due to DeMo, while the World Bank has down revised the GDP growth to 7 per cent; effects will be seen in the near future. When GDP reduces, gross income reduces and there will be less money for the government to spend, so the government is faced with the following options: either reduce the spending on non-priority sectors or increase deficit financing. Will the Defence Budget take a hit? While it is expected that the earnings for the government would be low (even the sale of stake in PSUs is not expected to yield the desired results, with an estimated shortfall of more that 565 billion rupees (US $8.4 bn), the Minister of State for Defence while delivering a lecture on Leveraging Defence Expenditure as a tool for Nation Building, in the first week of January, stated that the Minister is eying an enhanced budget allocation for the ministry while the Finance Minister presented his budget on 1 February this year. The Shekatkar committee was also appointed in mid-2016, by the Defence Minister to suggest recommendations on rebalancing the Defence Expenditure besides those for enhancing combat capability.

Dependence On Exports

‘Produce locally, sell globally’, the eye that the government has on exports is interesting. The Raksha Mantri has been drilling on all those who can hear and those who cannot too; that enhancing exports is key to military advocacy and military economics. Delimiting the geographical boundaries for business is always not a great idea. The prevalent philosophy of first supply to our Armed Forces and then only can you export, is fast changing, if not already

changed. This strategy will usher in the much needed foreign exchange, that otherwise has been frittered away in big time purchases for the Forces. The reduced cash flow for middlemen to meddle with the procurement process, concept of G2G deals to eliminate money power from any interference have all added to strengthen the economic fundamentals of procurement. Mr Parrikar, had in May 2016, announced his ambitious plan of hiking the defence exports by US$2 billion by 2018. This could be termed as ambitious by those that are not able to visualise the 360 degree coverage policy revamp. Besides other initiatives as elucidated earlier, the government has also simplified the process of obtaining a ‘No-Objection’ certificate that was an effort lasting an indefinite time period in the yester years. Increased participation of private industry, encouragement to DPSUs to earmark at least 10 per cent of their produce for exports, increased tenders under the ‘Buy Indian’ category of procurement, all add up to increased cash flow and boost in exports. Talks of a possible sale of the indigenous surface-to-air missile, AKASH, to Vietnam has already forced China to raise its tentacles; a worried China has taken suo-moto cognisance as reported in their media. This is just the beginning of military diplomacy. The LCA, Dhruv helicopters, other missiles and systems, radar systems, NPOVs, Brahmos cruise missiles, anti-submarine torpedoes are all there in the horizon besides the traditional bullet proof jackets, OPVs, spares, components and few sub systems, in electronics, radars and aerospace components.

DeMo Effect On Defence

Will DeMo then have any effect on the Defence Sector? Well yes, a positive effect. The increased budget allocation for the Defence Ministry with an earmarked allocation for defence modernisation and MAKE programmes, the innovative funding mechanism in offsets, reduced cash availability for laundering to sustain a cleaner procurement process, increased exports, increased order flow into domestic companies under the ‘Make in India’ categories of procurement, will all actually boost defence cash flows. Well, DeMo may actually have a positive effect on the defence sector, gearing up the sector to meet the challenges of increased indigenous production, investment in research and design, increased number of partnerships in the sector, increased FDI flows are all positives.

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demonetisation ONLY TIP OF ICEBeRG TACKLED

Bureaucracy And Benami Next In India, the only group of people who pay full income tax are the government servants. In every town or city with a population of 5 lakhs and above there may be at least 500 traders, shopkeepers and businessmen, a majority of whom are liable to pay income tax. In the larger cities, their number is much larger. This large non-tax-paying population needs to be brought into the tax net.

rime Minister, Narendra Modi has repeatedly said that the demonetisation in India has been delayed by forty years. Demonetisation of `1,000 and `500 notes was also earlier recommended by various persons during the seventies. Unfortunately, the then government felt that demonetisation would take away their ability to win elections because hoarded black money would not be available to buy the votes. So, the quantity of black money kept growing with the political parties as

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well as the corrupt industrialists and businessmen and also the corrupt government servants. To add to the woes of the economy, our neighbour was pumping in the fake Indian currency notes of high denomination into India with the dual objective of creating high inflation in the economy, as well as for funding of terrorist groups in Kashmir, to keep the â&#x20AC;&#x2DC;separatistâ&#x20AC;&#x2122; fire burning. The quality of printing of the fake Indian currency was so good that even bank officials were not able to detect the fake notes.

The Counterfeit, The Black And The White

The opponents of demonetisation are now stating that the so-called black money did not exist because almost the total 1,000 and 500 rupee notes issued by the government have almost completely come back into the banks. This raises some questions. The point to be considered here is how much of the currency notes deposited in the banks are counterfeit and also how much of it is actually black money being declared as white. The way in which lavish political rallies were organised, the way real estate prices kept shooting up and still buyers were available to purchase property at exorbitant prices, the way in which prominent weddings were

The point to consider is how much of the currency notes deposited in the banks are counterfeit and how much is actually black celebrated by the rich and the mighty with complete disregard to the amounts spent, were clear indications of the presence of hoards of black money as well as fake currency. The prices of daily need commodities soared to five or ten times their original cost. It was a heavy burden on the poor classes who survived on daily wages.

Even the middle class citizens had to tighten their belts and cut down their consumption. One began to wonder as to how far these conditions would deteriorate.

VK Anu Deuskar Sharma IPS (Retd)

Black Is Black

When we say ‘black money’, we mean money obtained by illegal means like bribes and kickbacks for favours given or the legitimate income accumulated without paying the tax due to the government or heavy donations given by big business houses to political parties to gain political protection while indulging in tax evasion, profiteering, frauds and other economic crimes. Black money in India exists in various forms. At a guess, 10 per cent to 15 per cent can be expected to be in the form of currency notes. The remaining black money can be found in the shape of

February 2017

The writer is an IPS officer of 1965 batch of Madhya Pradesh Cadre and retired as DGP. Before joining IPS,he has served in the Gorkha Regiment for five years as a Captain. He has served in the CISF as the Principal of their Academy for five years and in the National Police Academy as Jt Director for 7 years. He has written two research papers on ‘Organised Crime’ and ‘Impact Evaluation of Training of IPS Officers’.

Defence AND security alert

demonetisation ONLY TIP OF ICEBeRG TACKLED

Benami properties will be the next target by GoI

Cashless economy will help track tax evaders

investments in real estate like lands, farms, buildings, factories or in mutual funds, gold, jewellery and other deposits in financial institutions. Therefore, the opening gambit of demonetisation by the government, announced by the Prime Minister on 8 November is only against the 10 per cent to 15 per cent of the black money. The 85 per cent of the action is yet to come. Therefore, when the opponents of demonetisation say that it has not had any effect on the system, they are partly correct. The effect will be felt when action begins against the black assets like benami lands and properties with non-existent or fake owners. In the recent past, we have seen that whenever big black money owners are caught their wealth is in multiple properties, lands and

The creation of black money cannot be done by a single entity. It has to be aided and abetted by some agency or the other investments. Cash forms a small percentage of their total wealth. The black income is so deeply entrenched in the Indian economy and society that it is going to be a Herculean task to dig it out. Even if we are successful in recovering 60-70 per cent of the total black wealth, it will be a tremendous achievement and will bring about a sea change in the Indian economy and politics as well as terrorism and, law and order. The effect of demonetisation from 8 November 2016 till today, has already begun to be visible against domestic terrorist activities. The most prominent is the stoppage of stone pelting almost completely in Kashmir, as the separatists do not have the funds to pay the Kashmiri young men, who did the stone pelting for payment and

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not because of their convictions. The prices of a large number of commodities have been showing a downward trend. There are very few takers for real estate and real estate prices have come down considerably. The most important result seen is the terror it has created among those who have stacks of black money in whatever shape it may be. Their outpouring of venom against the order of demonetisation and particularly against the Prime Minister are clear indications of the above. The demonetisation has begun to hurt the hoarders and it is they who are shouting the loudest. The people of India have taken the inconvenience of shortage of cash in their stride. As stated earlier, the battle against black money, corruption and terrorism has just begun. This is the first battle of the war. There are many more battles to be fought.

Need Squeeky-clean Investigators

The first hurdle to be crossed is to take to task the bank personnel who have tried to scuttle the move by exchanging old notes for new ones for a commission. They have been disloyal to the government, to the country and to their institutions for which they should be severely punished. Otherwise, the government will not be able bring in further economic reforms which they may have in mind. You cannot do a good job with defective tools. Those who will be entrusted in the future, to implement orders of tracing benami properties or hidden black wealth, should be made to realise the dangers of committing wrongful acts like those committed by the corrupt bankers. The creation of black money cannot be done by a single entity. It has to be aided and abetted some agency or the other. The abettors are mostly our own employees of the government departments who are entrusted to ensure that things are done as per rules. We do not want to tarnish all the government departments as a whole but at the same time, we cannot deny the fact that we are tolerating a lot of black sheep in our fold. Corrupt income tax officers have to help or ignore tax evaders, otherwise they cannot evade tax. Corrupt officers in the revenue, municipality help in land grabbing, illegal

construction, encroachment of government lands, lakes etc. The PWD officers have to assist in passing bills for shoddy work by contractors and so the story goes on. How does one stop it? The obvious solution is to ensure that the government servants who are responsible to prevent tax evasion and corruption perform their duties honestly and diligently. But this is easier said than done. Corruption has seeped in so deep that these officers consider it almost a right to take bribes. This addiction to bribe taking has to be cured and the only method which appears feasible is:

Deterrent Action Against Officials

• The dilution or removal of Constitutional safeguards to government servants like Article 311 and the lengthy procedure for inflicting punishments on government servants. The procedure to punish acts of corruption or criminal neglect to aid corruption needs to be simplified and should be completed within a month or two at the most. Today, departmental proceedings drag on for years and the result is acquittal because of the delay. Often suspension is treated as a punishment which is absurd. Actually, it can be seen as a reward because the accused is paid without doing any work. • The quantum of punishment needs to be reviewed. The punishments provided are often so mild that the corrupt do not mind undergoing the punishment in lieu of making a lot of money. The minimum punishment for a proven charge

of corruption should be dismissal with an added jail sentence of at least 5 years in serious cases. The person indulging in corruption as well as the government servant abetting such corruption should be equally punished. • The very senior officers of the departments are generally able to get off scotfree and the middle and the junior level officers are roped in for punishment. This is not fair. The heads of departments should also have to share the blame for acts of corruption proven under their charge. They should at least be charged with dereliction of duty and slackness in control and penalised accordingly which should affect their future promotions. • In India, the only group of people who pay full income tax are the government servants. In every town or city with a population of 5 lakhs and above there may be at least 500 traders, shopkeepers and businessmen, a majority of whom are liable to pay income tax. In the larger cities their number is much larger. But as per the Finance Ministry’s reports in the media only a handful out of such persons pay tax. This large non-tax-paying population needs to be brought into the tax net. In order to achieve this we have to convert to a cashless system where undervaluation of income will become difficult. It is said that honesty or dishonesty flows downwards. If the top echelon of society that is the government, is honest, then honesty will flow downwards and vice versa.

BRAHMOS – A Truly Universal Missile

rahMos Aerospace, producer of the world’s leading supersonic cruise missile BRAHMOS, is taking part in the 11th edition of the AERO INDIA 2017 - a biennial international show on Aerospace, Defence, Civil Aviation, Airport Infrastructure and Defence Engineering, to be held from 14-18 February at Air Force Station in Yelahanka, Bengaluru. The India-Russia JV Company will showcase the BRAHMOS weapon system in various configurations. The major highlight will be the full-scale model of BRAHMOS air-launched version along with the indigenously-built aerial launcher integrated on the IAF’s Sukhoi-30 fighter aircraft during the upcoming five-day event. Also on focus will be the BRAHMOS Coastal Defence System consisting of the land-attack variant, Land-based Weapon Complex and BRAHMOS Ship-based Weapon Complex. The BRAHMOS air-launched version is currently getting all geared-up to be inducted into the Indian Air Force (IAF). It will be smaller and lighter than its previous variants but would be equally lethal in firepower and devastating capability as its range and maximum speed of 290km and 2.8 Mach respectively will remain unchanged. BrahMos Aerospace on 25 June 2016 successfully demonstrated the integration of world's most formidable supersonic cruise missile system BRAHMOS on

Su-30MKI frontline strike fighter of IAF. With success in its ongoing trials, the BRAHMOS air version programme inches closer towards actual test firing when a 2.5 ton BRAHMOS air-to-ground missile will be fired from the Sukhoi-30. The missile will enable the IAF to penetrate the enemy territory to deliver a blow to their vital installations from standoff ranges. The integration brings a paradigm shift in the capability of the IAF vis-à-vis its adversaries. The Su-30-BRAHMOS combination will carry out air combat operations within and beyond visibility range. The BRAHMOS supersonic cruise missile system has been developed jointly by scientific minds from India and Russia. The cruise missile has a flight range of up to 290km with supersonic speed all through the flight, and is capable of carrying a conventional warhead of 300kg. The missile can cruise at a maximum speed of 2.8 Mach.

February 2017

Defence AND security alert

cyberlaw jurisprudence EMERGING TRENDS

Indicators Of Impending Changes The year 2017 is further likely to see more discussions on the applicability of international law to cyber warfare issues. Discussions around rules and norms of behaviour in the cyberspace expected from all stakeholders in the cyber ecosystem will increasingly engage the attention of the relevant stakeholders.

he year 2017 promises to be a year of tremendous developments as far as Cyberlaw jurisprudence is concerned. The year 2017 is likely to build upon the foundations of Cyberlaw jurisprudence which has been placed at a strengthened position in the preceding years especially in the year 2016. It is hard to crystalgaze and predict specifically. However, on the basis of the information available, some broad trends of Cyberlaw jurisprudence can be detected on the horizon.

Policy And Regulation On Horizon

The first biggest trend on Cyberlaw jurisprudence that the year 2017 is likely to see emerging is cyber security legislative instruments and legislative approaches. Cyber security over the last few years has ceased to be a merely technical issue. On the other hand, it is becoming a very critical Cyberlaw, policy as well as regulatory issue. The recent instances of the US authorities alleging instances of Russian interference in its election

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process is one example in this regard. Further, in December 2016, the Legion group, one of the prominent hacking groups has reportedly threatened to target Parliament of Indiaâ&#x20AC;&#x2122;s website sansad.nic.in. They have also further indicated hacking of various hospitals and accounts of prominent celebrities, journalists and politicians. It has been further reported that more than 5,000 patientsâ&#x20AC;&#x2122; records at Sentara Healthcare were impacted by cyber security breaches. Further, it has also been reported in Australia that Prime Minister Malcolm Turnbull has decided to launch cyber security probe after Members of Parliament were affected by global Yahoo data breach.

Political, Social, Economic Impact

A recent report has stated that in the United States, the numbers of data breaches are constantly increasing, seeing an upswing to the tune of 40 per cent. Countries are quickly going to realise that cyber security breaches are not just aimed at targeting their networks but are also

being done in a manner so as to impact the significant political, social and economic developments and trends in the target country. In this context, protection and preservation of cyber security assumes even more significance. The aforesaid developments once again bring forward the necessity for the countries to have in place adequate cyber legal frameworks to effectively regulate cyber security. Different countries have already started coming up with different legislations and policies concerning cyber security. The year 2017 is likely to see more countries coming up with detailed legislative frameworks as also national policies impacting cyber security. The difference of approaches, which the specific countries will make, will be dependent on the peculiar challenges that they face from time to time. Some countries are likely to introduce significant cyber security laws while other countries are expected to go through soft legislations route, by coming up with national policies and appropriate guidelines to govern cyber security ecosystem and the roles, duties and responsibilities of respective stakeholders therein.

The Legion group, one of the prominent hacking groups, has reportedly threatened to target the Parliament of India Global Approach Needed

Another important trend in Cyberlaw jurisprudence that is likely to evolve will be increased adoption and execution of cyber security bilateral cooperation agreements and arrangements. Countries across the world have recognised that there is lack of an international Cyberlaw on cyber security. They further recognised that cyber security is a global paradigm and that it would require global approaches to be effectively dealt with. However, they are also appreciating that it will take some time for international Cyberlaw frameworks to be put in place. Hence, more and more countries are likely to go in for bilateral cyber security arrangements and cooperation agreements as also anti-hacking agreements with other countries. These arrangements and bilateral treaties would aim to strengthen cooperation mechanisms between countries and provide for more sharing of information concerning protecting and preserving cyber security as also information concerning cybercrimes. These bilateral agreements and arrangements are further going to contribute to the crystallisation of key international principles impacting Cyberlaw and cyber security which countries could agree upon, thereby contributing to the development of international jurisprudence concerning cyber security law. The year 2017 is further likely to see more discussions and debate upon coming up with international legal framework impacting cyberspace. The absence of an international cyberlaw has necessitated that countries look at common legal principles impacting the regulation of cyber issues at a global level.

International Treaty

Pavan Anu Sharma Duggal The year 2017 is likely to see further discussion moving in the direction of distilling the international commonly accepted principles and denominators impacting Cyberlaw which could then be part of an international treaty. The author has already mooted the idea of the need for having in place an International The writer is an advocate Convention on Cyberlaw and at the Supreme Court of Cybersecurity in 2015 itself. India, is Asiaâ&#x20AC;&#x2122;s and Indiaâ&#x20AC;&#x2122;s As the world begins to see leading expert of Cyberlaw, more global threats emerging Cyber Security Law and to the security and stability Mobile Law and has been of the Internet, there is likely acknowledged as one of to be more calls for coming the top four cyber lawyers up with common minimum in the world. He is also the denominators and president of Cyberlaws.net. principles of international law He is heading the Pavan which could then contribute Duggal Associates. in the direction of an International Convention on Cyberlaw and Cybersecurity. Another important trend that the year 2017 is likely to see is the increasing attempts at legislative approaches aimed at regulating emerging kinds of cybercrimes. Cybercrimes are continuing to proliferate with each passing day. Newly emerging kinds of cybercrimes like ransomware have already impacted industries worldwide. The advent of the Darknet and cyber criminal activities originating therefrom provide further legal headaches and challenges for law enforcement agencies across the world. In this context, the year 2017 is likely to see more movements in the direction of strengthening national legislative approaches and legal frameworks regulating cybercrimes. Meanwhile, the year 2017 is likely to see far more calls for closer cooperation at the international level concerning cybercrime information sharing and strategies for getting effective prosecutions in cybercrime matters. The year 2017 is further likely to see more work happening on developing the legal jurisprudence concerning the regulation of cyber-criminal and illegal activities done on the Darknet. Hence, there is a need to work on attribution related principles concerning cyber-criminal activity on the Darknet.

Internet Problems

Another important significant Cyberlaw jurisprudence trend that is likely to emerge in the year 2017 would relate to crystallising and developing principles impacting attribution of cyber-criminal activities in cyberspace at international level. Internet has made geography history but the same boundary-less medium is sought to be regulated by national legislations. Consequently, internet jurisdiction continues to be a big legal problem. More work needs to be done on tackling the legal challenges raised by the Internet jurisdiction in the year 2017. Cyber criminals often hide behind the

cyberlaw jurisprudence EMERGING TRENDS anonymity on the Internet as also the complex challenges raised by Internet jurisdiction to escape exposure to potential prosecution. Globally, the discussion is likely to be distilled further in the direction of evolving strong and sound legal principles impacting attribution of criminal activities on the Internet. The year 2017 is further likely to see more work happening to develop the legal principles governing Internet of things and transactions made thereon. With 24.8 billion number of devices expected to be connected with Internet of things by 2017, cyber security and protection of privacy become important vectors on which legal frameworks need to be developed. As the year 2017 witnesses more adoption and usage of Internet of things, it is also likely to see more work on the legalities and legal principles governing Internet of things, more so in the context of cyber security, personal and data privacy as also data protection issues connected therewith. The year 2017 is further likely to see more discussion and debate on how to ensure data protection in a ubiquitously connected Internet. Countries may look at different approaches prevailing in the global scenario to modify and remodel existing data protection strategies aimed at protecting data effectively and efficaciously.

The year 2017 is likely to see more regulation of increased role of intermediaries and service providers Consumer Protection

As more and more consumers join the digital bandwagon at the global level, we are likely to see further jurisprudence evolving concerning consumer protection issues in cyberspace. Consumer protection issues are already marked as important issues in some jurisdictions while in other jurisdictions, consumer protection is virtually non-existent. The year 2017 is likely to see further development of jurisprudence impacting consumer protection in the year 2017. The year 2017 is further likely to see more work being done on the legalities pertaining to blockchains as a transformative technology. With increased adoption of blockchains in banking, financial and other sectors, there is a need for more work to evolve jurisprudence concerning blockchains at a global level. The further adoption and strengthening of usage of crypto currencies across the world further means that work on the legal challenges raised by crypto currencies need to be done in 2017 so as to enable countries to have common minimum platform of regulating activities done using crypto currencies.

Social Media

Social media will continue to rise in 2017. New social media platforms are increasingly engaging the attention of the netizen community. The legalities concerning social media jurisprudence require more discussions and debate. There is an urgent need to protect women and children on social media from unwarranted exposures and influences and Cyberlaw needs to play a significant role therein

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As cyber radicalisation and cyber terrorism continue to grow unabated, the year 2017 is likely to see more focus on coming up with national and international frameworks to effectively regulate the same. Counter narratives to deal with cyber radicalisation, would require enabling legal support from legal frameworks all over the world. Cyber terrorism jurisprudence would need to be expanded in 2017 to cover the emerging new activities being engaged in by cyber terrorists all over the world. The year 2017 is likely to see more focus on the regulation of increased role of intermediaries and service providers as data repositories, with increasing compliance and due diligence requirements. Countries across the world are increasingly likely to examine the important complex role played by the intermediaries in the cyber ecosystem and put more responsibility on such data repositories concerning cyber security as also protection of third party data. The year 2017 is further likely to see the focus on protecting and preserving data as also personal privacy. In that context, the year 2017 is likely to see increased discussion and debate on how to protect and preserve data and personal privacy in accessing consumer data.

Encryption

Since encryption is a very important subject, the year 2017 is likely to see further calls for need to develop legal principles in such a manner which can help create golden balance between protection of privacy using encryption and the intrinsic rights of the sovereign states to have access to backdoors. The year 2017 is further likely to see a conflict emerging between protection and preservation of individual rights on the Internet and increasingly bigger ambit of cyber sovereignty of sovereign nations. As freedom of speech and protection of fundamental rights on the Internet engage the centre-stage attention in different jurisdiction, Cyberlaw jurisprudence is likely to be called upon to develop robust effective and efficacious principles which can help balance both the competing demands from different stakeholders in a delicate manner. The year 2017 is further likely to see more discussions on the applicability of international law to cyber warfare issues. Discussions around rules and norms of behaviour in the cyberspace expected from all stakeholders in the cyber ecosystem will increasingly engage the attention of the relevant stakeholders. The aforesaid are some of the important trends in Cyberlaw jurisprudence that one can detect emerging in the horizon. Needless to say, I am not a soothsayer and it is not possible to predict comprehensively. However, on the basis of the developments that have taken place in the year 2016 and earlier years, it is expected that the aforesaid issues will increasingly become more significant in terms of their importance and would further help in contributing to the evolution of cyberlaw jurisprudence at global, regional and national levels. It will be interesting to see how the jurisprudence concerning cyberlaw issues, aspects and subjects will actually evolve in a robust and efficient manner in the year 2017.

aviation

THE BOEING CONNECTION

India’s Long-Term Military Aviation Partner The world’s biggest democracies finally stand on a shared platform; have some congruence in their world view and most importantly, feel the need to work together on many counts. Aerospace is the real place for joint action. India and the US have taken a conscious first big step and Boeing is the leading partner.

illiam E Boeing bought a shipyard in Seattle in March 1910 which later became his first airplane factory Pacific Aero Products Co. Boeing has come a long way since and today makes airplanes, rotorcraft, rockets and satellites. It is among the largest global aircraft makers; the second largest defence contractor and the largest exporter in the United States by value. In 2015, Boeing with US $96.11 billion sales, ranked 90th on the Fortune Global 500 list and ranked 27th on the ‘World’s Most Admired Companies’. At the advent of 21st century, the rise of muscle-flexing China became a concern to India, the US and the South Asian countries. Thus, began close relations between the world’s oldest and the largest democracies. Cooperation in global security, seat on the global high table (the UN Security Council), admission into multilateral export control regimes (NSG, MTCR) and offer of joint-manufacturing through technology sharing were key milestones. Among the increasing cooperation in defence, aviation has seen the fastest results.

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Boeing’s India Aviation Connect

Nearly 75 years ago, Tata Airlines operated a Boeing DC-3 aircraft in India. Since then, with the 707, 747, 757 Freighter, 777, 737 and the game-changing 787 Dreamliner, Boeing has been the mainstay of India’s commercial aviation sector. Boeing’s military aviation connect in India began in 1940s, when the Indian Air Force (IAF) acquired the T-6 Texan (Harvard Advanced Trainer) and the C-47 Skytrain transport, a military variant of the DC-3. Today, with the IAF’s 10 C-17 Globemaster III strategic airlifters and Indian Navy’s eight P-8I maritime surveillance and anti-submarine aircraft, Boeing has become a great partner in India’s military mission-readiness. Additionally, the IAF operates four 737-200s as Signal Intelligence platforms and three 737 Boeing Business Jets for VVIP commitments.

Globemaster Era

In 2011, 10 Boeing C-17 Globemaster III airlifters were ordered for the IAF and began inducting in 2013. All the

C-17 deliveries were completed in 2014.One more has since been ordered. The 4-engine C-17 Globemaster III can carry large equipment, supplies and troops directly to small airfields in harsh terrain up to 4,500 kilometres away and land in 3,000 ft or less on a small unpaved airfield in day or night. It will augment India’s ability for inter-theatre movement of troops and equipment. The C-17 carries a payload of 77.5 tonnes vis-à-vis the IL-76’s 50 tonnes and has delivered cargo in every worldwide operation since the 1990s. The IAF’s C-17s have seen action from day one moving men and materials for flood and cyclone relief operations and humanitarian missions, including in Bihar, Odisha, Jammu and Kashmir. The C-17s were actively used during Nepal earthquake and in the Yemen evacuation. The C-17s are also operated by the UK, Australia, Canada, Qatar, the UAE and the NATO Airlift Wing. In 2009, India ordered eight P-8I Neptune aircraft, an India specific variant of P-8A Poseidon. All eight are today operating with the Indian Navy. Four more have since been ordered. The P-8I is a long-range, anti-submarine and anti-surface warfare, intelligence, surveillance and reconnaissance aircraft capable of broad-area, maritime and littoral operations. It is a military derivative of the Next-Generation Boeing 737-800 and combines superior performance and reliability with an advanced mission system that ensures maximum interoperability. In September 2015, orders were placed for 22 AH-64E Apache Longbow attack helicopters to replace the IAF’s Mi-25/Mi-35 fleet and 15 CH-47F Chinook heavy -lift helicopters to replace Mi-26. The AH-64 Apache is a twin-engine helicopter that features a nose-mounted sensor suite for target acquisition. The four stub-wing hard-points allow carriage of a mix of AGM-114 Hellfire missiles and Hydra 70 rocket pods. About 2100 AH-64s have been produced to date and have served in conflicts in the Kosovo, Afghanistan, Iraq, Lebanon and Gaza. It has a service ceiling

of 6,400 metre giving it high Anu Air Marshal Sharma altitude ability. The approximate Anil Chopra PVSM, AVSM, VM, VSM US $1.0 billion contract for (Retd) multi-mission, heavy-lift transport 15 CH-47F Chinook helicopters brings new capabilities. The Chinook is used in air assault missions and inserting troops into fire bases. It can carry up to 55 troops or 12,700kg cargo. Its primary mission is to move troops, artillery, ammunition, fuel, supplies and equipment into The writer was a pioneer the battlefield. The secondary of the Mirage 2000 fleet missions include medical and commanded a Mirage evacuation, disaster relief, Squadron, two operational search and rescue, aircraft airbases and the IAF’s recovery, firefighting, parachute Flight Test Centre ASTE. drops and heavy construction. He was the Team Leader of Chinook has seen operations an aircraft upgrade project since Vietnam. Newer variants in Russia. Currently, he is were central element in the a member of the Armed Gulf War and Afghanistan. A Forces Tribunal at Lucknow. total of 1,179 Chinooks have been built. Boeing now has offered other defence products such as unmanned systems, security solutions, and network-centric operations systems.

Military Aircraft On Offer

Boeing has offered to make its top-end fighter jet Boeing F/A-18E/F Super Hornet in India and taking Indian manufacturing to global standards if the IAF were to buy it. This twin-engine, supersonic, multi-role fighter is same as operated by the US Navy. Raytheon APG-79 AESA radar has been offered on the aircraft. Boeing proposed joint manufacture of the jets with Indian partners. It also planned to offset the cost by setting up a US $100 million maintenance and training hub in Nagpur. This would be the first time the Super Hornet has been offered for production in a foreign country. Boeing and Tata Industries agreed to form a joint-venture company. The new entity would supply components for Boeing military aircraft world-wide, including for the Super Hornet. Proposal would include transfer of technology and significant amount of the production to India. Combined Hornet requirements for the IAF and the Indian Navy could be around 200 and may justify production. Boeing is also keen to offer the ScanEagle UAV to India for internal security. Catapult launched 4-foot long aircraft with 10 foot wing span; ScanEagle has 20-hour loiter time and very little operational and logistical requirements. It can carry a 15 kilogram payload for greater than15 hours.

Organisational Invest

Boeing is in India as a long-term strategic partner and committed to help India develop indigenous aerospace industry. Boeing wants to combine its technological know-how and world-wide presence with India’s software and industrial skills for a win-win combination for both. Their presence is a mutually

February 2017

Defence AND security alert

aviation

THE BOEING CONNECTION

beneficial relationship. They have set up the Research and Technology Centre in Bangalore and field service offices in Mumbai, the IAF’s Hindon airbase, Indian Navy’s INS Rajali and at New Delhi. Boeing subsidiary, Jeppesen – a flight navigation solutions provider is in Hyderabad. They have another subsidiary, Continental Data Graphics (CDG) in Chennai. Boeing in India has around 500 employees and many more support the civil aircraft systems supply chain.

Make In India Initiatives

Boeing’s joint venture with Tata Advanced Systems Limited (TASL) is for aerospace and defence manufacturing including unmanned aerial vehicles. In September 2014, the Dynamatic Technologies and Boeing inaugurated a plant to manufacture critical parts for the Chinook helicopters. Boeing created a state-of-the-art facility with the TAL Manufacturing Solutions Ltd to manufacture floor beams for the Boeing 787-9 Dreamliner. The TAL also makes ground support equipment for the C-17. The Dynamatic Technologies and Tata Advanced Materials Limited (TAML) have already delivered P-8I power and mission equipment cabinets, and the TAML is making auxiliary power unit door fairings and composite tail-cones for the P-8I. Hyderabad based Avantel Ltd has delivered the mobile satellite systems for the P-8I. Hyderabad-based Cyient (formerly Infotech) has supported a number of critical design-engineering projects for Boeing airplanes and currently provides design and stress support on the 747-8 Freighter and the 787-8 and 787-9. The Electronics Corporation of India (ECIL) has provided the speech secrecy systems for the P-8I. The Bharat Electronics Limited (BEL) has delivered the Indian-designed tactical Data Link II for the P-8I. The BEL has also delivered the identification friend-or -foe interrogator, a battle management system. The BEL is also on contract to provide F/A-18 flight deck cockpit panels. The Hindustan Aeronautics Ltd (HAL) was the single-source producer of 757 over-wing exit doors. The HAL has also manufactured the 777 up-lock boxes,

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F/A-18 gun bay doors, F/A-18 wire harnesses, P-8I weapons bay doors and the P-8I identification friend-or -foe transponders. Boeing’s India partners are already delivering world-class quality for company’s worldwide supply chain for most advanced aircraft in the world.

Research And Technology Partnerships

Boeing has had research and development (R&D) presence in India since 1995 when it established research collaboration with the National Aerospace Laboratories (NAL) in Bangalore and subsequently ran projects also with the Indian Institute of Science (IISc) and the Indian Institute of Technology (IIT) Kanpur. The IISc is one of the only 10 universities worldwide that has such a special relationship with Boeing. Aerospace Network Research Consortium (ANRC) was set up with the IISc along with industry partners the HCL Technologies and Wipro. In 2009, Boeing established the Boeing Research And Technology Centre. Also set-up in Bangalore, Boeing Strategic Development and Experimentation (SD&E) Centre to provide defence experimentation and decision -support services to understand the future needs of the Indian Armed Forces. In collaboration with IIT Bombay and Department of Science and Technology (DST), Boeing helped conceptualise the National Centre for Aerospace Innovation and Research (NCAIR) in 2009 to support world-class research and manufacturing development in aerospace in India. The NCAIR has resulted in 20 patents and technology breakthroughs. Boeing invests in an externship programme with IITs and other top engineering colleges every year to select students to work with industry partner. Boeing is partnering with the National Skill Development Corporation India (NSDC) to provide vocational training to Indian students. The world’s biggest democracies finally stand on a shared platform; have some congruence in their world view and most importantly feel the need to work together on many counts. Aerospace is the real place for joint action. India and the US have taken a conscious first big step and Boeing is the leading partner.

Soaring New Heights, Scaling New Opportunities. We are at:

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demonetisation CAN CLEANSE DEFENCE PROCUREMENT

Transparency In Formulating Specifications For Equipment Demonetisation is expected to have far reaching positive impact in the long run in both quantitative and qualitative terms on economy in general and defence procurements in particular. Whereas demonetisation in itself is just one tool, the extent of impact will largely depend on the way this powerful tool is handled along with determination, efficiency and swiftness with other associated tools needed to weed out corruption.

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harat, a land unique in many ways is also unique in terms of having faced and survived countless aggressions and invasions for centuries and it has a lot to learn from it’s long history. Survival in the past do not guarantee survival in future in the absence of adequate and timely preparedness. Whether one likes it or not, the security of the nation from external and internal threats is of utmost importance - important for existence itself. Historically, people who belonged to the erstwhile Bharat have had to pay an extremely heavy price whenever the ruler have neglected security – irrespective of the reason behind such neglect. For example, when reintegration and consolidation began during the Chandragupta period in Mauryan times, Bharat turned towards disintegration after witnessing the pinnacle under Emperor Ashoka, as the mighty king swung from one extreme of aggression and violence to another extreme of rigid mindless adherence to nonviolence in the name of peace. One can never over-emphasise the need to keep away from any extremism and to strike a balance, particularly when at stake is the security of the nation. Being strong, brave and willing to act is the key prerequisite to the right to enjoy the luxury of peace. That our expenditure on security since the end of the colonial rule has been too modest is evident from the fact that a significant portion of our territory continues to be occupied by aggressors.

Being strong, brave and willing to act is the key prerequisite to the right to enjoy the luxury of peace Near-term Implications

Demonetisation of high value currency notes announced on 8 November 2016 by the Government has been viewed both as a monster as well as a panacea depending upon the colour of the glasses of the viewer. Irrespective of the colour of the glasses or without any, corruption can be

readily identified as the biggest Ravi Anu Kumar Sharma Gupta and the most dangerous monster eating away a bulk of the enormous potential of our nation. Influence is Widespread: The process of demonetisation, evidently aimed at handling the cancerous growth of corruption, especially the menace of black money, is bound to influence every The writer is former aspect of nation’s economy Scientist ‘G’ and Director and the life of every citizen Public Interface, DRDO, to varying extent. Issues Ministry of Defence. related to defence including defence procurement are no exception. Recently, during a casual discussion, it was argued that as such, demonetisation may not have any impact on defence expenditure since most of the dealings are done in foreign exchange. Apparently seeming logical, none of the arguments appear to hold ground. In the first place, it has been a wrong notion that a major share of outgo from the budget of the Ministry of Defence is in foreign exchange. This may be due to excessive attention being paid to the numerous ‘kick-back’ stricken imports one after another. Taking example of the budget for the FY 2016-17, about 65 per cent of the defence budget is sanctioned under revenue head bulk of which involve transactions in rupee. Among the stores procured under capital head, those procured from domestic sources constitute over 55 per cent, as evident from the approvals granted over past few years by the defence acquisitions committee (DAC). The share of indigenously procured systems has been steadily rising. Thus, only about a little over 20 per cent of the total budget expenditure (revenue + Capital) might be involving foreign exchange. Rupee Value: The sudden dip in value of Rupee observed during the first two weeks of post demonetisation period had seen gradual recovery after touching 68.7235 on 28 November 2016 (it was higher at 68.7775 on 26 February 2016 without any demonetisation) and

February 2017

Defence AND security alert

demonetisation CAN CLEANSE DEFENCE PROCUREMENT now seems to be following its usual variations. Reduced availability of currency notes in the market and higher tax collections likely to strengthen the Rupee in relation to the US dollar and other currencies once the near term effects of demonetisation begin to subside. DPP Not Linked To Demonetisation: Short term post -demonetisation cash-crunch or the availability of cash on the other hand, should not have any implication on defence procurement process. All government payments to vendors are supposed to be made through cheque or online transfer. Even though the share of cash transactions in related dealings may be higher as one goes down the supply chain in case of domestic procurements, a short term cash crunch is unlikely to have significant adverse impact.

Long Term Implications

A prime minister few decades ago, had honourably admitted that only 15 paise out of one rupee spent by the government was able to reach the intended beneficiary. Though the figure of 15 per cent was perhaps an overestimate, even at 15 per cent, the loss to national exchequer and consequently to every citizen has been gigantic. The enormity of the nationâ&#x20AC;&#x2122;s potential wasted down the drain of corruption can be gauged from the fact that the economy of Bharat having continued to grow and expand in multiple dimensions is currently the fastest growing economy in the world in spite of such a colossal waste. The long term implications of demonetisation Online transactions are on the rise since the demonetisation

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emanate from its positive impact on national economy including the defence sector. Howsoever, versatile or powerful, a single tool cannot accomplish a complicated multi-dimensional task. Demonetisation is just one such versatile tool assisting in accomplishing highly complex task of taming the monster of corruption (an immortal monster, its annihilation is impractical) and the fate of corruption will be determined by the way this tool of demonetisation along with the other equally important tools are used. As such, demonetisation sure is sure to have a strong positive impact on national economy percolating down to each sector including the defence. Positive Impact Showing Up: Demonetisation has already begun to bring in its positive results. The recently released figures for tax collected by the Government till December indicate a quantum jump in both, direct and indirect taxes (12 per cent and 25 per cent respectively, as compared to corresponding period of previous financial year). The positive impact on revenue collection is likely to be more significant over the full financial year and during subsequent years, implying availability of more funds to the Government for various purposes. Purchasing power of a common citizen, especially the poor among the masses is sure to rise considerably as the fraction of each rupee spent by the government reaching the intended cause increases. The implication is a spiralling growth of national economy. Rising Defence Needs: The single most important reason for unending inflow of invaders of Bharat has been

the flourishing economy of the region and consequential wealth of proverbial ‘Golden Bird’. Bharat’s emergence as the fastest growing economy further enhances the need to protect national assets and to strengthen national security. The above facts combined with the geopolitical compulsions imply a significant rise in the levels of defence procurement. However, a combination of the rising defence expenditure with an impetus to Make in India is expected to result in a synergistic growth of domestic industry and economy rather than becoming a drain on national resources.

•

Combination of rising defence expenditure with impetus to Make in India is expected to result in a synergistic growth Demonetisation: Maximising Benefit

It is well-known that a bulk of the wealth is concentrated in the hands of top few thousand people or families. Doesn’t the same apply to black money as well? An important aspect is that whereas black money might have been remaining accumulated among top few, the generation of black money is extremely broad-based, emanating at grassroot levels and travelling through web of multiple channels leading to top few. Ironically, those at grassroot levels remain the worst sufferers rarely able to see their own contribution to their sufferings, albeit under compulsions. Take for example, the case of a poor labourer who has had no option but to pay in cash, mostly without proper receipt, out of his genuine, hard earned income for his day to day needs e.g grocery, clothing etc. Thus, begins the generation of black money with cash exchanging hands after hands with no track or trace till it reaches an accumulator and gets dumped - to be used later for dubious activities. Evidently, the generation of black money has been highly broad based: bribes to get the bills cleared with least delay, to those paid to get loans sanctioned or to get licences and clearances, commissions to get contracts or clearing inspections or getting a date in court suitably postponed…the list has been never-ending. Maximising the benefits of shock treatment induced through demonetisation resulting in a shakeup and exposure of many hidden or dormant channels requires: • Exploring the channels so identified, following the leads to unearth hidden wealth and bringing hidden money to mainstream economy. • Making necessary changes in the systems and processes to block generation and usage of black money and its possession riskier and costlier than likely or perceived advantages. The first one is apparently going on and is beyond the scope of present discussion. Few suggestions that may help in the later, applicable in general or specific to defence sector, but certainly not comprehensive are mentioned: • Pride of being a taxpayer: Being taxpayer needs to be made advantageous, a matter pride and not a matter of ‘burden and compulsion’.

•

Transparency in procurement process: Each and every purchase, however small or big, should be made through eprocurement only in a transparent manner. Transparency in process of formulating requirements specifications and changes therein: The shroud of secrecy needs to shrink. There is no justification for hiding a information from the honest taxpayers and citizens that is readily available to vendors and agents. Secrecy invariably leads to corruption causing, in the long run, damages that are often far costlier than the perceived damages from free availability of information. The recent infamous case of changes in specifications of VVIP helicopters kept under cover of secrecy is a glaring example. The financial loss to exchequer is miniscule as compared to damage caused to the image of country’s premiere organisation when it’s Chief had to be arrested on charges of corruption. Irrespective of the final outcome of the case, irreparable damage attributable to undue secrecy, has been already done. A look back in history is likely to reveal a long list of cases wherein specifications are drawn with an aim to zero down to a particular vendor or to eliminate indigenously available product. Reason publicly mentioned for decision to import three-crew operated T-90 tanks in large numbers was delay in development of Arjun MBT (a four-crew operated tank with far more stringent requirements laid down by the single user). What remains incomprehensible is “How an imported system with inferior specifications could become acceptable?” Contract management: Norms for contract management need to be strengthened and made more transparent leaving minimum scope for subjectivity (and manipulation). Digital Transactions: Making it mandatory for all government financial transactions (payments and receipts) to be online (not repeat, NOT even through cheques) will greatly reduce corruption. Additionally, similar obligation should be made mandatory for each vendor down the supply chain through which public funds flow directly or indirectly. Accountability: ‘Justice delayed is justice denied’. Similarly, delay of ‘due payment’ is ‘payment denied’. There is a strong need to fix deadlines for making payments to the vendor with stringent actions against those responsible for unjustified delays.

One of Several Tools

Demonetisation in itself is just one tool, the extent of impact will largely depend on way this powerful tool is handled along with determination, efficiency and swiftness with other associated tools needed to weed out corruption are used. Need of the hour is to make all out efforts to bring about historic changes in the system necessary to minimise corruption and eliminate black money.

February 2017

Defence AND security alert

demonetisation DEFENCE OF KASHMIR

Follow Up The Disrupted Money Trail

The window of opportunity that opened with demonetisation may not be as wide as expected especially after reports that new notes were recovered from bodies of dead terrorists in Jammu and Kashmir within a few weeks of the monetary â&#x20AC;&#x2DC;surgical strikeâ&#x20AC;&#x2122;. New sensors to make the LoC more transparent will be successful in detecting infiltration only if they are monitored realtime and not be used just like recording machines to be rewound in a postmortem investigation.

to families who put their children in the line of fire. That there has been a dramatic reduction in stonethrowing could be the cumulative effect of drying up of funds caused by the demonetisation and the onset of battle fatigue. Both these factors need to be exploited by the BJP-PDP coalition government to ensure that the disruption continues beyond the snowfall period which could also be one of the factors that has caused a reduction of stonethrowing.

ow that the Government has disrupted the sources of foreign funding of terrorism in Jammu and Kashmir in particular with the demonetisation of high denomination notes, it must follow it up with taking the moral high ground in its campaign against foreign inspired insurgency in the trouble-torn State. That there has been a dramatic reduction in stonethrowing by children is an indicator of the ugly nexus between their act and foreign funding which was feasible because large amounts could be packed in small packages for distribution

February 2017 dsalert.org

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Winning Hearts And Minds

Counter-insurgency operations are basically methodologies to try and win the hearts and minds of a disgruntled populace. The year 2016 has been retrogressive in that in the Kashmir valley human existence has been disrupted over several months over the killing of the terrorist Burhan Wani, a local boy who went wayward after witnessing the treatment meted out to his brother by the security forces. One can argue over cause and effect but the fact remains that it fuelled an uprising which was used by Pakistan to create conditions

for a foreign intervention – a repeat of oft discredited method of using infiltration as a tool for ‘liberation’ of the Kashmiri people. The use of pellet guns (shotguns that fire dozens of pellets that disperse over a wide area and cause indiscriminate damage to human beings in turn became a recurring cause of unrest leading to months of disturbances.

much to bear for a few hundred rupees that are reportedly being paid to families to send their children to throw stones at the security forces.

Use Breathing Space Sagaciously

However, it has potential of generating revulsion if used in any way like the pellet gun was. This can happen if the security The writer has covered personnel in a fit of pique all the wars with Pakistan spray homes and business as War Correspondent premises indiscriminately just and reported from the conflict zones in Vietnam, for the pleasure of causing Laos and Cambodia in discomfiture to the generally South East Asia as well as hostile public. The concept from Afghanistan. He is of ‘winning hearts and the author of “India: The minds’ needs to be ingrained Security Dilemma”. into the security forces at all levels from the police constable to paramilitary and military personnel and the assistance of the scientists of the Defence Institute of Psychological Research should be sought to avoid the perceived barbarity that fuels insurgency.

Now that there is a perceived break in the cycle of stonethrowing and attacks on military targets as in Uri, Pathankot and Nagrota both the State government and the Union Home Ministry must get down to rebuilding the Intelligence gathering apparatus at the ground level – the local policemen and Panchayat Pradhans – who had become targets for the terrorists. Nearly a decade of good policing and a well-networked and unified counterinsurgency grid did manage to reduce the effects of the insurgency in Jammu and Kashmir to the point that the Pakistan Army Inter-Services Intelligence and its terrorist handlers had begun to feel the pinch of diminishing returns till the pellet guns became an issue and added fuel to the fire.

What was perceived to be a winning hand over Pakistan instigated insurgency in 2015 suddenly dissolved to uncertainty in 2016 could be a product of failure to understand the Chinese guerrilla tactics

Anu CecilSharma Victor

Intrinsic Psychological Operations

Border Management

When Parliament is given such specific figures as 105 terrorists (a threefold increase over the previous year) having infiltrated across the Line of Control in the first nine months of 1916 it raises the question: if you can count them, why did you not kill them?

A Stinking Alternative

It is amazing that nobody in a nation long afflicted with insurgency and adept at dealing with the core issues; no one at any level of governance could read the deleterious effect of the use of pellet guns in the Kashmir valley. Now that there is an opportunity to take corrective action provided by the disruption in the financing of insurgency and unrest, caused by the demonetisation, it is time to take corrective action and reclaim the moral high ground by at least appeasing the local dissent. This can be done by a very public and well-publicised proclamation that the pellet gun would be the weapon of very last resort authorised only by a magistrate at the scene of disturbances. At the same time an alternative, non-lethal crowd control weapon must be unveiled in full public view. Such a weapon is available with the Israelis. It is called Skunk because it dispenses a fluid that stinks like that of the animal and worse, it cannot be washed off for days. Like a water cannon, it is vehicle mounted and it also has a grenade launcher version and a hand-held canister. The fact that it is non-lethal and poses no threat of injury makes it a better alternative to the pellet gun which once fired will leave a wide swath of serious injuries if not death. But it stinks and that could be too

February 2017

Defence AND security alert

demonetisation DEFENCE OF KASHMIR

Tension in the valley has drastically eased post demonetisation

Clearly, these figures have been collected from CCTV cameras and infrared sensors installed along the barbedwire fence. This is a post ipso facto discovery well after the infiltration has taken place. This leads to the inevitable conclusion that the Indian defence forces – the Border Security Force and the Indian Army – have become afflicted by complacency that static defences engender over time. That is why the infiltrators have been able to attack Uri, Pathankot and Nagrota after full reconnaissance and surveillance of targets.

Misreading China-Pak Tactics

That what was perceived to be a winning hand over Pakistan instigated insurgency in 2015 suddenly dissolved to uncertainty in 2016 could be a product of failure to understand the Chinese guerrilla tactics that the People’s Liberation Army has taught the Pakistan Army which in turn has passed on to the terrorist groups under the Lashkar-e-Toiba and the Jaish-e-Mohammad (the reason why Beijing is so stoutly defending Masood Azhar from the UN sanctions). It is an established fact that counter-insurgency is a manpower intensive campaign. Yet just before the Kargil invasion of 1999 the strength of the Indian Army was whittled down by 50,000 men by the simple expedient of not recruiting new personnel. If more manpower was not required why was a new strike Corps raised for defence of Arunachal Pradesh a decade later? The perceived threat of a twofront war existed even before Kargil occurred.

Get Real

The committee appointed to investigate the Uri and other attacks is believed to have submitted its report on how to improve perimeter defences of military establishments within reach of the LoC. Hopefully, it will strike down the rather inane manner in which the Border Security Force was hoping to ring alarm bells by hanging tin cans that are expected to jingle if touched. This mindset has not

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changed over a period of two decades when a `700 crore project to set up perimeter walls and barbedwire fences in Srinagar was completed. Then beer bottles were hung on the wire fence in the hope that they will give early warning of an enemy presence! There were occasions when the terrorists just walked in from the front gate.

New Tactics

To be able to fully utilise the disruption induced in the funding system of the terrorists the Indian security forces must make drastic changes in their defences. The window of opportunity that opened with demonetisation may not be as wide as expected especially after reports that new notes were recovered from bodies of dead terrorists in Jammu and Kashmir within a few weeks of the monetary ‘surgical strike’. New sensors to make the LoC more transparent will be successful in detecting infiltration only if they are monitored realtime and not be used just like recording machines to be rewound in a postmortem investigation. Laser barriers in riverine terrain is a good idea and it needs to be executed fast to effectively plug proven vulnerable loopholes in our defensive infrastructure.

More Dogs

In all the attacks on military barracks that have taken place over the past decade (as well as in cordon-and-search operations when terrorists manage to extricate themselves), there is little sign of proper use of military dogs. The numbers of the canine corps needs to be raised exponentially. There is a suggestion that the Defence Service Corps that mans the inner perimeter of military establishments is to be refurbished. It should be occasion to match this with an increase of the dog population. Also, dog breeding centres should be tasked to check whether free ranging dogs would better serve the purpose than do one-handler-one-dog mode that is currently in use. A dog trained to ferocity could serve a dual purpose of sounding a warning of intruders and at the same time keep the sentry alert.

January 2017

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