From Wealth to Power? Institutional Resilience of India’s Defense Sector

by Moritz Weiss

Abstract

The paper puts forward a historical institutionalist account of how rising powers translate their increased wealth into military strength. Micro-foundations of institutional resilience are theoretically developed and empirically applied in order to explain arms procurement in India. Initially, the rising power had promoted to exploit market competition of its massive procurement of combat fighter aircrafts since 2007. Yet, despite unquestionable benefits, the Indian government ultimately returned to state-run intergovernmental purchase from France in 2015, even though it deprived itself from bargaining leverage and technology transfers. It is argued that the combination of two mechanisms explains this institutional choice: (i) a functional misfit and (ii) political resistance by vested interests, which unfolded in India’s implementation of new market-based rules and triggered a shift back to a state-run approach. This explanation is substantiated by a process-tracing analysis. First, the mechanism of functional misfit materialized in uncertainty, as institutional prerequisites of markets, such as sound legal protection, were absent. Second, the politics of implementation revealed the second mechanism of how vested interests unfolded their resistance against reforms by utilizing ambiguous rules and capitalizing from unintended consequences of initial institutional choices. In short, the defense sector’s institutional resilience prevailed against the government’s top-down layering strategy to add new rules to a historically evolved institutional setting. Therefore, the paper is able to contribute to theoretical and empirical debates on institutional change as well as on rising powers and the constraints they face in their attempts of transforming growing wealth into military strength.

Keywords: historical institutionalism; institutional resilience; political economy of arms procurement; defense-industrial sector; liberal reforms; emerging economies; India.

Please contact Moritz Weiss if you are interested in the manuscript.