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U.S. Eager for Slice of India's Defense Pie
The Washington Diplomat / November 2009

By Larry Luxner

Worried about future terrorist attacks and eager to replace its aging fighter jets and weapons systems, India is quietly emerging as one of the world's most lucrative markets for defense equipment.

Over the next five years, India plans to spend $45 billion to protect itself, according to Nik Khanna, director of policy advocacy at the U.S.-India Business Council, an initiative of the U.S. Chamber of Commerce.

India is already one of the world's top three importers of weapons, along with China and the United Arab Emirates and U.S. defense contractors hope to grab an ever-increasing slice of the Indian pie.

"The United States sees India as a vital partner in solving challenges such as global security, the risk of terrorism and fighting the global recession head-on," said Khanna, noting that the alignment of U.S. and Indian interests has emerged as a core objecive for U.S. strategy in South Asia

That wasn't always the case.

"For over three decades, the United States and India eyed each other with suspicion, with opposing Cold War alignments, vastly different economic models and an agenda dominated by nuclear-proliferation issues," Khanna wrote in a recent article published by Force, an Indian magazine that specializes in natural security. "Over the last 10 years, both countries set down a path to fundamentally transform the bilateral relationship, culminating in the historic signing of the U.S.-India civil nuclear accord by President Bush on Oct. 8, 2008, thereby opening a wide vista of opportunity for U.S.-India collaboration."

In 2001, the Bush administration lifted sanctions against India that were originally imposed after India's nuclear-weapons tests in 1998. Subsequent terrorist attacks in both countries the 9/11 attacks and last year's massacre in Mumbai have brought New Delhi and Washington closer together, encouraging greater bilateral cooperation against a common perceived enemy: Islamic fundamentalism.

Khanna said 70 percent of India's existing defense platform including the Indian Air Force's 680 fighter jets is of Soviet or Russian origin, mainly MiG aircraft.

"They're now moving away from that, recognizing that India has a multi-dimensional relationship with key countries including the United States," he explained. "We believe U.S. industry can be India's most effective partner. One term that defines all of this is crucial inter-operability. India has conducted more joint exercises with the U.S. in the last four years than with any other country."

At the moment, U.S. companies are currently bidding on $16 billion worth of programs now in the pipeline, including $11 billion on the MMRCA (medium multi-role combat aircraft) project alone to supply the Indian Air Force with 126 fighter jets. Under terms of the deal, India will buy the first 18 aircraft directly from the manufacturer; the remaining fighters will be built under license with a transfer of technology by Hindustan Aeronautics Ltd., one of Asia's largest aerospace companies.

Six manufacturers are competing for the juicy contract: Dassault's Rafale; Eurofighter's Typhoon; Lockheed-Martin's F-16 Super Viper; Boeing's F/A-18E/F Super Hornet; Saab's Gripen NG and Mikoyan's MiG-35.

"We're competing against some of the best aircraft in the world," he said. "Lockheed and Boeing are doing trials right now. It's an eight-month process, doing humid-weather, hot-weather and cold-weather trials, and flying in the Himalayas. The results of those tests are classified."

The remaining $5 billion in potential U.S. contracts includes helicopters and marine aircraft to provide surveillance for India's 7,000 kilometers of coastline.

"This would give India the capability to protect from terrorist attacks in the future," he said, noting that the terrorist who carried out the recent atrocities in Mumbai arrived in a commandeered fishing boat from Pakistan.

"This is a very strong concern," he said. "India wants to finally get Pakistan to step up its vigilance activities and curb all forms of extremism and cross-border terrorism. They've got to own up to their responsibilities and stop allowing their country to be used for planning terrorist attacks."

Besides Lockheed and Boeing, other U.S. giants bidding on contracts issued by India's Ministry of Defense include Honeywell (civilian and military engines) Northrop-Grumman (a range of homeland security capabilities), Raytheon, General Dynamics and BAE, said Khanna, adding that "for obvious reasons, I can't mention any specifics."

Many of these companies have opened new offices in India, anticipating a rush of business, with the backing of the Aerospace Industries Association, a lobbying group based in Arlington, Va.

"India is in the midst of a significant modernization campaign, coinciding with the fact that the U.S.-India relationship has been on a very strong uptick in this administration," said Remy Nathan, assistant vice-president for international affairs at AIA.

"We see defense trade as a very strong foundation for security and cooperation. As a matter of fact, when you have these kinds of competition with the F-16 and the F-18, the the Navy and Air Force are looking to extend production lines and lower unit costs, keeping the supply chain active. We often say that when countries buy American prodoucts, they're also investing in a relationship with the U.S. military."

The Pentagon does not seem terribly concerned about exporting civilian nuclear technology to India despite New Delhi's consistent refusal to sign the Nuclear Non-Proliferation Treaty.

"The underlying rationale for the civil nuclear agreement is that India has always been a very strong supporter of non-proliferation, and itself never sold any of its nuclear technology to other countries," said Robert O. Blake, assistant U.S. secretary of state for South and Central Asian affairs. "India says it supports the president's ambitions to forge an agreement to create a world free of nuclear weapons. So we consider them to be very important potential partners in this."

Blake told The Diplomat he believes the Indian govenrment will stick to its own self-imposed moratorium on nuclear testing despite calls from some domestic opposition parties and military hawks that India's nuclear arsenal is getting old and needs to be tested from time to time.

"U.S. companies are very interested in the possibility of doing more business in India. One of the most important outcomes of Secretary Clinton's recent visit to India was an agreement on end-use monitoring," he said. "This is one of a series of steps taken on both sides that will enable our defnse industries to work more closely together."

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