BUSINESS UNDERPINS INDIA-US DEFENCE DEAL – ANALYSIS ( Source- The Eurasia Review, Author- Sameer Patil)

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Source- The Eurasia Review

Author- Sameer Patil

On January 25, India and the U.S. renewed their bilateral defence pact for 10 more years. The ‘2015 Framework for the U.S.-India Defense Relationship’ strengthens cooperation between the two countries in the areas of defence technology, military exchanges, and counter-terrorism.[1]

For the first time, co-production and co-development are at the core of the defence engagement outlined in the framework, indicating the importance for India of technology transfers and indigenous manufacturing. The agreement makes India part of a group of nations that includes Japan, U.K., and Taiwan, with whom the U.S. cooperates on defence technology.

Specifically, four pathfinder projects for co-production and co-development were identified through the Defence Technology and Trade Initiative of 2012, which serves as the guiding principles for the framework for cooperation. All the projects are experiments in making simpler technologies and easy-to-produce equipment. If successfully executed, they will help India build advanced weapons systems in the future and co-develop other weapons technologies with the U.S.

The pathfinder projects are a real opportunity for India to move away from arms imports, which have so far constituted approximately 70% of the country’s defence expenditure—of approximately $47.4 billion in 2013. [2] Defence acquisitions from the U.S. itself have crossed over $10 billion in the last decade.[3]Screen Shot 2015-01-30 at 9.10.38 PM

Over the last decade, the India-U.S. bilateral defence cooperation has mainly focussed on purchases, including big ticket items such as the $4.1 billion acquisition of the C-17 transport aircraft. [8] The equipment the U.S. has currently offered India for co-production and co-development may appear less advanced in comparison. But, as India’s slow and difficult experience in indigenously developing and producing some of these basic technologies shows, they require significant amounts of R&D. Given India’s modest defence industrial base, the equipment being offered by the U.S. is easy to produce and a good start to boosting the defence industry.

Co-production will also mean a consistent availability of high-quality weapons to the Indian armed forces. For instance, the Mobile Electric Hybrid Power Sources system will be particularly useful for the army units deployed in the remote and high-altitude locations of Jammu and Kashmir and in the Northeast. Similarly, the Raven drones offer a 360° view of the proximate area for soldiers, providing valuable tactical intelligence.

The plans for India-U.S. defence cooperation also align well with the Modi government’s ‘Make in India’ framework and its efforts to promote the role of Indian business in defence production. In particular, two segments will benefit—the Indian partners of existing joint ventures, and small and medium enterprises, which constitute the larger defence industrial ecosystem.

Both AeroVironment and Lockheed Martin already have joint ventures in India with private defence companies—Dynamatic Technologies Limited[9] and Tata Advanced Systems,[10] respectively. Therefore, the go-ahead by India and the U.S. for these companies, which hold rights to the drone and the “roll on/roll off” technology, to undertake co-production, will give them a head-start. The plans to make Raven’s joint venture in India the global manufacturing hub for the product will help Indian companies become a part of the global supply chain.

While co-production implies manufacturing an existing product, co-development involves jointly conceiving and creating a new product. This will eventually be a significant opportunity for India to establish its R&D base—a basic requirement for a robust defence industrial foundation. It is what China did, and it enabled the country to transition from being the world’s largest arms importer to becoming the fifth largest arms exporter.[11] [12]

Since 2012, the U.S. government has offered defence technologies for co-development to India, after industry-wide consultations within the U.S. Unfortunately, the Indian side has not matched these efforts. India’s Defence Research and Development Organisation (DRDO) did identify advanced technologies—such as those related to lasers and hypersonic flights—for acquisition.[13] However, in doing this, the DRDO did not consult either public sector units or businesses in the defence sector. The Indian government must now comprehensively address these gaps.

Other potential R&D opportunities arising out of co-development with the U.S. must also be optimally utilised—including in naval systems, the shipbuilding sector, electronics, and semi-conductor industries,[14] which constitute the core of modern defence equipment. This potential can be realised if the government establishes a regular forum to consult with business, where larger national interests can be aligned with commercial interests.

By taking these necessary steps, India can strengthen its defence R&D and build a robust indigenous defence industrial base—and that ultimately is the goal of defence technology cooperation with the U.S.

About the author- Sameer Patil is Associate Fellow, National Security, Ethnic Conflict and Terrorism, at Gateway House.

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