US recognition of India as a ‘major defence partner’ during Prime Minister Narendra Modi’s US visit comes at a time when America’s leading defence companies are eyeing the Indian market for prospective multi-billion dollar ‘Make in India’ deals. The decision is expected to further boost India-US defence ties and open new channels for US’ defence majors to offer and make their products in India.
According to Pratyush Kumar, President of Boeing India, “The convergence of the two governments will enhance the cooperation between the two countries at various levels. This increased defence cooperation will lead to the development of a robust defence industry.” “The move will propel the Indian defence industry’s integration into the global supply chain of major Original Equipment Manufacturers (OEMs), boosting the prime minister’s ‘Make in India’ initiative,” he told FE Online.
Welcoming the US decision, Phil Shaw, CEO at Lockheed Martin India told FE Online, “We look forward to collaborating even more closely under Prime Minister Modi’s Make in India, Skill India and Start-Up India initiatives along with the Indo-US Defence Technology and Trade Initiative and to strengthening our partnership in the years ahead.”
“We are proud to partner with the Government of India to meet the critical needs of the Indian armed forces. We are also proud of our manufacturing operations in India, which today produce key portions of every C-130J and Sikorsky S-92 helicopter sold around the world,” he added.
Both Boeing and Lockheed Martin India have offered to manufacture their fighter jets F/A-18 and F-16 under the Modi government’s Make in India initiative. US is not the only country that sees potential in India’s defence market. Sweden’s Saab has also expressed willingness to make its Gripen fighter in India. A decision on which plane would eventually carry the ‘Made in India’ tag is expected in March 2017, Defence Minister Manohar Parrikar has said in the past.
In 2015, Boeing received an order for 22 AH-64E Apache attack helicopters and 15 CH-47F Chinook heavy-lift helicopters from the Ministry of Defence. The $2.5 billion deal had been stuck for quite some time. Consequently, Boeing announced a JV with Tata Advanced Systems to manufacture aerostructures for the AH-64 Apache helicopter under Modi government’s ‘Make in India’ initiative.
Lockheed Martin has also proposed to make its Javelin missile system in India. US government has been trying to sell the Javelin, which is a lightweight, man-portable, shoulder-fired, fire-and-forget medium antitank weapon system, to India for quite some time now. Javelin is part of the DTTI (Defense Technology and Trade Initiative) between India and US, and if the deal comes through it will be a multi-billion dollar one.
PM Narendra Modi met US President Barack Obama last week and America’s decision to recognise India as a ‘major defence partner’ was announced as a part of the two leaders’ joint statement.
The two committed to enhance cooperation in support of the Modi government’s ‘Make in India’ initiative and expand the co-production and co-development of technologies under the DTTI.
The new DTTI working groups will include agreed items covering naval systems, air systems, and other weapons systems. “In support of the Make In India initiative, and to support the development of robust defense industries and their integration into the global supply chain, US will facilitate export of goods and technologies, consistent with US law, for projects, programs and joint ventures in support of official US-India defense cooperation,” the statement said.
How will India and its defence industry benefit from strengthening of defence ties with US?
A Confederation of Indian Industry (CII) official tells FE Online, “DTTI and now India’s membership to MTCR will facilitate US companies to bring in higher level technology, which otherwise called for prolonged process of federal, and in some cases Congressional, approvals.”
According to this official, this development would help give ‘Make in India’ a boost in the defence sector. “With ‘Make in India’ in backdrop, MoD accorded AoN (Acceptance of Necessity) for defence acquisition schemes for more than Rs 20,0000 crore during 2014-15 and 2015-16. 85% (by value) of these schemes fall in ‘Make in India’ categories, for which RFP (Request For Proposal) will be issued to only Indian Vendors. So, it leaves very limited options for FOEMs but to collaborate or co-produce with Indian industry through suitable technology transfer or technical support or Joint Venture arrangements with Indian Industry.
“Not only US Companies, even French, Israeli, Swedish, British, Norwegian and Russian companies see India as a long term investment and business destination as far as defence equipment and products are concerned,” he adds.
Ankur Gupta, Vice President – Aerospace & Defence at Ernst Young India feels that India is yet to reciprocate as aggressively as the US to help the defence ties attain their full potential.
Gupta says, “In the last 24 months, the Indo-US ‘defence’ bonhomie has reached a new level and this is primarily due to the intense efforts across all levels of the US defence and civil administration coupled with quick turnarounds & responses from the Indian side. Whereas the outcome of these efforts has been visible at the global level, and all in India’s favour, at the transactional level a lot more needs to be done from the Indian side to help the US OEMs succeed in this market.”