India-US defence ties: Making co-development mantra work

us-india-chuckThe United States’ ‘Pivot to Asia’ policy, and attempts to rope in India as the ‘linchpin’ of this construct has generated a flurry of analyses and speculation among foreign policy wonks and policy-makers.  The changes in the structure of international politics, a striking convergence of interests and persistent efforts by the governments of the two countries have contributed to shaping a robust Indo-US relationship. In an op-ed article titled ‘India and the United States: Our Time Has Come’ which appeared in the Huffington Post, US Secretary of State John Kerry expressed his belief in the strength of the India-US relations as an ‘opportunity against long odds’. As India and the US come together to engage in a deepening partnership, he opines that it is one ‘strategic partnership whose time has come’.

Bolstering Defence Ties

The India-US relations have gained visible momentum, especially in the arena of defence trade and cooperation. Through joint ventures (JVs) and defence co-production, India and the US have an opportunity to take their strategic partnership to new heights, a crucial area which will be in focus during the visit of US President Barack Obama to India, the first American president to be invited as the chief guest at India’s Republic Day celebrations.  The JVs of Indian and American companies and the co-production of military hardware will prove mutually beneficial and add strategic heft to bilateral relations, with a careful considerations of factors like maturity of markets and technology absorption capabilities.

New Framework, New Horizons

us-defence-pranabThe New Framework of Defence for US-India Defence Relationship, signed in 2005 by India’s then Defence Minister Pranab Mukherjee and US’ then Defence Secretary Donald Rumsfeld, had set the tone for a new era, which transformed the complexion of bilateral defence and security ties. The Framework for US-India Defence Relationship, signed for a period of 10 years, is due to be extended and signed again during President Obama’s January 25-27 visit to India. In 2005, as a part of the strategic partnership agreement, President George W. Bush ended the long-standing US policy and openly acknowledged India as a legitimate nuclear power, a shift in a stance that culminated in the sealing of the path-breaking India-US nuclear deal. In the framework agreement, it was mutually agreed that the US and India will treat each other at the same level as their closest partners on issues including defence technology transfers, trade, research, co-production and co-development. The India-US civil nuclear agreement also marked the Asian country’s integration into the global nuclear mainstream. The US later agreed to facilitate India’s membership into the world’s top multilateral technology control regimes such as the Missile Technology Control Regime (MTCR), Nuclear Suppliers Group (NSG), Wassenaar Arrangement and the Australia Group.

modi-obama-meetSignificant progress has been made on strengthening Indo-US defence and security ties over the course of almost a decade, including advancement in the operationalisation of the civil nuclear cooperation. Several commentators have noted that there has not been notable progress on the civil nuclear deal due to issues pertaining to India’s nuclear liability law, which is seen as onerous by American companies. However, during Prime Minister Narendra Modi’s visit to the US in September 2014, experts on both the sides met to discuss the way forward for nuclear cooperation. While it is hoped that India and the US would be able to start the process of implementation of the nuclear deal, the Indo-US defence trade is burgeoning and has exceeded $9 billion.

As the US stands committed to strengthening India’s capabilities, as a part of its new Asia-Pacific strategy, the two countries are making noteworthy progress in the defence sector, with brighter prospects of research and development and co-production. India’s defence industry remains imports-driven and its defence indigenous manufacturing base and technological threshold remains low. Stockholm International Peace Research Institute (SIPRI) report research shows that India’s imports of major arms increased by 111 per cent between 2004-08 and 2009-13, making it the world’s largest importer. Understanding India’s need for defence indigenization, Ashton Carter, recently nominated by President Obama as the new Secretary of Defence, in 2012 provided an impetus to an initiative known as the Defense Trade and Technology Initiative (DTTI) to spur cooperation on technology transfers and goal of indigenization.

Make in India

us-india-makeCo-development and co-production of defence military hardware would provide greater strategic heft to the Indo-US bilateral relations. Co-production is a positive step towards expanding the scope of the New Framework of Defence, to be renewed in 2015. This would enable the US-India defence relationship to move beyond a transactional ‘buyer-seller’ model. The idea of co-producing with American companies is also resonates well with the new Indian government’s commendable efforts of ‘Make in India’. Make in India initiative stands for improving the efficiency of producing in India and would give a boost to the much-needed indigenous production of cutting-edge weaponry. This initiative has also garnered interests of American businessmen, and the Indian government’s decision to hike the FDI limit to 49% in defence has added to positive momentum in defence ties. Trends in military spending reports that global defence budgets are shrinking and the US policymakers are debating the appropriate level of US military spending given increasingly constrained budgets.

Recent analysis by IHS Aerospace, Defence & Security, highlights this overall shift in worldwide defence spending and presents a need for greater agility in responding to an ever-more competitive market place for the US defence contractors. American businessmen would thus find co-production in India beneficial to their interests as India presents unprecedented opportunities for investment and trade and lowered manufacturing costs. Sharing technological know-how of cutting-edge technology with Indian defence companies would provide a lever for the American government of showing intent towards the partner country. Manufacturing and co-production in India would provide a large employment base and also sustain jobs for American companies, which are looking with renewed interest at blue-ocean markets.

A Work in Progress

us-india-defenceCo-development and co-production is a work in progress and there are several technical challenges such as ensuring quality controls, understanding the level of maturity of the markets and technological absorption capabilities of Indian markets.

Recently, in a speech in New Delhi Puneet Talwar, US Assistant Secretary for Political and Military Affairs, reaffirmed the shared strategic commitment to pursue opportunities for defence co-production and co-development to take bilateral relations to the next level by modernizing the US defence exports licensing system. Geopolitical factors such as the tremendous speed of Chinese military modernization have contributed to expediting the idea of Indo-US defence co-development and co-production. There are several co-development and co-production projects in the pipeline as the US understands that there is a strong mandate in India favouring co-production, and not solely procurement. Both the governments understand the realities of changing defence and security complexion in the region. As India plays an important role in ensuring peace and stability in South Asia, the Indo-Pacific and increasingly on the world stage, the US envisages India as a stability anchor and understands the need to bolster India’s defence capabilities.

Moving beyond buyer-seller model

Co-production is going to act as an enabling lever to energise the US’ strategic partnership with India. As India takes steady steps to spur economic recovery through second generation economic reforms, American defence contractors understand the present favourable business climate in India. There are examples of Indian and US defence companies in joint ventures like those of Defence Public Sector Undertaking, Bharat Electronics Limited (BEL), to focus on the design, development, marketing, supply and support of civilian and select defence radars for India and the global markets. The other examples include Lockheed Martin and TATA to build C-130 components, and Sikorsky and TATA to build cabins for S-92 helicopters. India and the US share common political values and a strategic vision and are destined to be long-term partners. The  defence ties would be one aspect of cooperation which would assume growing importance as both the countries join hands to combat terrorism, cooperate in counter-terrorism efforts, and in addressing a host of non-traditional security challenges, maritime security and intelligence sharing. Needless to say, the co-development and co-production of military equipment would only serve to buttress an increasingly strong defence and strategic partnership between the world’s oldest and largest democracies.

(sylviaSylvia Mishra is New Delhi-based foreign affairs and security policy analyst)