Flintlock
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It is highly unlikely that the government can do anything to directly compete with the private sector when it comes to reimbursement or general glitz. It is also clear that banking solely on the "Mera Bharat Mahan" factor is not enough as far as the educated middle class is concerned who also happen to be the primary source of the officer cadres. Unfortunately the vast portion of the population that lives in the underdeveloped rural areas and serve as the primary source of Jawans, do not as yet have the necessary tools (particularly good education) to qualify for officer training. This explains why the critical shortage is in the officer corps; who are essentially the backbone of Indian armed forces; unlike western/modern militaries where the majority of the workload is borne by the NCOs.
I agree. Your explanation seems much more thorough than mine.