India and US to Boost Military Ties

Friday, August 08, 2014
U.S. Defense Secretary Chuck Hagel is meeting the new NDA administration for the first time

Joint production of military hardware and increasing arms sales are the key areas being discussed in the ongoing visit to New Delhi by U.S. Defense Secretary Chuck Hagel that is aimed at boosting defence and strategic ties.

India set the stage this week by increasing the limit for foreign direct investment (FDI) in its defence sector to 49 per cent from 26 per cent. Defence Minister Arun Jaitley said on Friday that the Indian government would like to work closely with the U.S. in developing its indigenous military hardware manufacturing industry.

Joint production of equipment has become a necessity since India imports almost 70 per cent of its defence needs from foreign manufacturers.

“The development of our own indigenous capabilities is a major objective that guides our present policies. In this direction, we have taken steps to raise the FDI cap in the defence sector. We look forward to work closely with the US in this regard,” Jaitley told the U.S. delegation.

However, the new FDI limit is still lower than the majority stake that U.S. defence firms would want before allowing the transfer of technology.

The U.S. has been pushing defence deals with India worth over Rs 20,000 crore ($3.3 billion), including the sale of Apache attack helicopters, Chinook heavylift helicopters and Javelin anti-tank guided missiles.

It has already sold India equipment worth Rs 60,000 crore ($10 billion) in the last decade, but none of the previous weapons sales included joint production or co-development, let alone transfer of technology.

The two sides also decided to extend the ten-year defence framework agreement between India and the United States that expires in July 2015.

India and the U.S. have rapidly expanded military and business ties in recent years, despite disagreements over issues such as intellectual property rights and market access.

According to a Defence Ministry official, India has offered to almost double its order for Apache helicopters – adding a follow-on order of 39 AH-64D Apache helicopters in addition to the 22 currently being negotiated. This is expected to drive down costs, though both sides have been unable to agree on the price of the gunships, with the initial deal estimated to be worth Rs. 8,400 crore ($1.4 billion).

The Apache helicopters are meant to replace the Indian Air Force's ageing fleet of Soviet-era aircraft and will be armed with Hellfire and Stinger missiles.

The 39 additional helicopters have been requested by the Indian Army, some of which will be deployed as part of a new mountain division it is raising along the border with China, an army official told Reuters.

"The point is we are looking at 60 to 70 pieces eventually, so the expectation is the vendor will factor that in in the price negotiations," said the unnamed defence ministry official.

Hagel's three-day visit follows one by U.S. Secretary of State John Kerry last week and is part of the build-up to the meeting of Prime Minister Narendra Modi and President Barack Obama in Washington in September.

According to Reuters, Washington is keen to step up cooperation with India, seeing it as a strategic partner in the face of an increasingly assertive China.


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