Amid talk of a ‘drift’ in Indo-US relations, or the partnership having reached a ‘plateau’, Prime Minister Manmohan Singh met with US President Barack Obama in Washington DC last month. The visit caps a period of heightened exchanges at a high political level. The key areas are energy, security and defence issues, economic issues and strategic consultations on geo-political issues. As the South Asian region evolves strategically, India and the US have various common interests. These include a stable Afghanistan, maritime security, fighting terrorism and religious extremism, and preventing proliferation of weapons of mass destruction and related technologies.

Strategic ties The India-US defence partnership has emerged as one of the centrepieces of the relationship. The US defence establishment’s transactions with India are nearing the $10-billion mark. This relationship has been driven by India’s focus on modernising its armed forces, building its indigenous manufacturing capabilities and making a strategic shift from relying solely on Russia for defence equipment. Bilateral ties have got a great push since the signing of the New Framework for Defence Cooperation in 2005. The US has indicated that it would like to move India up the ladder of strategic partners and treat it on a par with trusted allies such as the UK and Australia while doing defence trade. This transformation from a mere buyer-seller relationship to that of developmental partners will certainly have bearing on the geopolitics of the South Asian region.

This Defence Trade/Technology Initiative has the blessings of the top echelons of the Pentagon and is being personally spearheaded by Aston Carter, US Deputy Secretary of Defence, who had visited India just before Manmohan Singh’s US visit. Carter had met with the National Security Advisor and senior officials of the Ministry of Defence to discuss the contours of this alliance.

The interest in co-production and co-development alliances has probably been fast-tracked by the success of the BrahMos cruise missile co-developed by a consortium of Indian and Russian defence majors, including private sector companies like Larsen & Toubro and Godrej. This model has helped India to develop capabilities from a single land version missile to naval and air variants, with a total order value of $6 and a lucrative export market.

It is estimated that by 2025, India is likely to spend as much as $200 billion to procure defence equipment. It has already established itself as the largest global arms importer during 2007–2012, accounting for 10 per cent of total global arms imports. For financial year 2012-13 India has allocated $35.16 billion for spending, under its defence budget, of which more than $17.5 billion will be spent on procuring modern weapons systems and military hardware. The US, faced with significant defence budget cuts at home, is keen on tapping this huge opportunity. In 2011 alone, India purchased arms worth $6.9 billion from the US, emerging as the latter’s third-largest arms importer. US corporations, and by extension, the US economy, have reaped considerable commercial benefits from such arms sales.

private players However, the relationship is untenable if the US considers India only as a market to sell its military hardware. Foreign Military Sales (FMS) has been the predominant route to establish the US defence industry in India. Further, there is a realisation that India wants a better share of the pie in technology transfers. The private sector defence players of both countries are thus challengers to this government-to-government legacy, looking for opportunities in co-production and co-development of platforms.

Yet, there are some hurdles that industry on both sides needs to cross. India has repeatedly requested transparency from the US side on release of sensitive technology which has so far been denied, as it dealt with the nitty-gritty of US ITAR (International Traffic in Arms Regulations) Export Controls. This lack of information of the ‘status’ of licence approval is perhaps the main reason for the European and Israeli companies doing more defence deals with Indian industry — and generating significant business.

Another issue is that the Indian defence establishment is dominated by defence PSUs. There is palpable discomfort from the US side to share sensitive technologies with these PSUs that have historical partnerships with the French and the Russians.

India has an exemplary record in non-proliferation and needs to be treated differently than so called untrustworthy or rogue states.

This augurs well with the stand that FICCI has taken for a long time — give the private defence industry its pride of place based on its inherent strengths and capabilities of frugal engineering. There is an imperative need to extend the cooperation beyond defence to Homeland Security to enhance capacity building, including in policing of large cities, partner in security technologies, combating counterfeit currency, and in securing ports, airports, etc.

three-point agenda FICCI suggests a three-point agenda towards a mature relationship between India and the US, aimed at equal partnership.

First, credible Transfer of Technology (ToT) to build the trust of Indian defence establishment. The impression is that the US is not willing to share technology with India but only push sales through the FMS route.

All present deals by US companies are through the FMS route, thus restricting the gateway for transfer of technology, and send the unintended message that the US industry cannot win in competition.

Second, identify and amend current US laws which hamper technology transfers and prevent US companies from sharing/entering into technical discussions with Indian companies.

Last, identify areas of interest in strategic domains, see where they diverge and embark on co-development and co-production.

Comfort level in the arena of defence interaction is going to be a key factor in making a success of the India-US high technology trade. The real test would be when sensitive technologies are available to Indian entities in a manner that is not discriminatory in any form. This is actually a pre-requisite if a India-US defence partnership truly defined on the tenets of co-development, co-production and enhanced technology is to be realised.

(The author is Secretary General, Federation of Indian Chambers of Commerce and Industry)

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