Indian Defence Review

Defence Cooperation: A Future Necessity?

The outlook of defence cooperation between the two countries is estimated at $25 billion in the next decade. A key part of the Indo-US defence cooperation is the Defence Technology Initiative (DTI), co-chaired by the US Deputy Secretary of Defence, Ashton Carter and the National Security Adviser of India, Shiv Shankar Menon. The DTI is intended to facilitate the transfer of defence technology to India, but is being hampered by Indian indifference, stemming from the apparent ideological and political resistance to developing deeper ties with US.

Last year, Ashton Carter, in a sitting of the DTI, had offered Menon the opportunity for Indian defence companies to join hands with US partners in five co-production ventures, in which the Indian companies would be provided with the technology and guidance for building five weapon systems in India. These included, the Sikorsky naval multi-role helicopter, the Raytheon/Lockheed Martin Javelin anti-tank missile, the BAE Systems 127mm naval gun and two other projects. The products built in India could be exported to other nations too. In the year since the offer, there has been a studied silence from India. Neither the Secretary of State John Kerry nor the Vice President, Joe Biden could elicit any response during their recent visits.

Indian Ministry of Defence (MoD) officials suspect the US intentions in the offer that it wants to capture the Indian market for these systems through a ‘back-door’ entry, circumventing the Defence Procurement Procedure (DPP). The US Department of Defence (Pentagon) on the other hand, points out that co-production of these weapons would bring in high technology, upgrade Indian defence manufacturing sector and familiarise the Indian companies with best global practices, while giving a boost to Indian defence exports which today are a paltry $5 million annually.

The US Defence Secretary Leon Panetta’s visit in June 2013 grabbed attention as he described India as the ‘linchpin’ in the new US defence strategy. He also asserted that there will be a transition in defence trade from the present ‘buyer-seller’ relationship to substantial co-production and ending in high-technology joint research and development. He has named his deputy, Ashton Carter as the lead man to move the defence ties forward. India should reciprocate with a name having adequate government support and mandate to break through the stumbling blocks of the bureaucracy.

India must remember that it is the largest importer of arms in the world and that its aspirations for self-reliance can only be met through such bi-lateral cooperation. While India continues to voice concerns on Transfer of Technology from the US due to certain conditions being imposed on it, it must also appreciate that there has been a paradigm shift in US thinking since 2005 on technology transfers to India. In 2011, well over 99 per cent of licence requests from India for dual-use technology were granted with similar figures for munitions licences. It will take some more time for the US to build confidence on transferring technology to India, for in US thinking, technology is a strategic commodity rather than a commercial item as in Russia, France or Israel.

The growing collaboration between Indian and US companies apart, no amount of transfer of high technology can make India self-reliant in defence production unless it itself goes in for some reforms in the existing defence industry infrastructure and practices. Some suggestions are put forth for consideration.

The Defence Public Sector Undertakings (DPSUs) in India have a monopoly of their products and a captive market in the Indian defence forces. Some competition should be permitted by allowing the Indian private sector to compete in the defence market and also giving the armed forces the latitude to reject sub-standard products. While some leeway has been granted, more often than not, the private industries do not get a level playing field when putting in their bids. In addition, private players should have some financial incentive to build necessary infrastructure or else they will pull out totally from defence production, as some are already thinking of doing so. The private sector should also be encouraged to utilise the vast scientific talent available in the country for some basic research and development. Most of the US defence and space projects are being headed by Indians for want of facilities at home.

The Defence Procurement Procedure (DPP) came into effect in 2002-2003 and has been amended practically every year thereafter. Strict adherence to the DPP, coupled with the slow decision making process in the MoD, is hindering the procurement of military hardware and modernisation of the armed forces. While procedures have to be followed, the MoD should enhance transparency.

Foreign Direct Investment (FDI) is pegged at 26 per cent for defence procurement deals. There is a need to increase it to at least 49 per cent to assist Indian firms get the necessary capital, as well as the exposure of foreign manufacturing processes. This has been done but only in respect of high-end technologies as well as on a case-by-case basis.

The offset policy too, has been revised at regular intervals ever since its inception, the last being in August 2012. So far, the results of the offset programme have been disappointing, to say the least. India continues to remain dependent on foreign sources not only for weapon systems, but also for repairs and assembly of components in India. The DPSUs and the private sector are not equipped to absorb the offsets. It may be worthwhile to establish an offset commission to examine the most optimal way to use the resources coming in.

The Way Ahead

The US occupies, and in the foreseeable future, will continue to occupy a position of pre-eminence on the world stage. Indian perception of world politics is a multi-polar world where a congregation of nations would set the agenda – India would be one among them. The days of the Cold War, when relations with one would be at the cost of relations with another, are long gone. A lasting relationship with the US is foreseen and India would do well to recognise the reality.

National power, in today’s global polity, is assessed on a much broader criterion, which includes among others, economic progress, technological know-how, managerial expertise and military capabilities. India is fast growing in most of the spheres and the other nations, more so the US, recognise this as a fact. However, the growth and modernisation drive in the military is based on foreign assistance rather on self-capabilities.

While technology transfers will continue to be a good measure of US commitment towards India, India too should reciprocate in some manner. India has been consistently refusing to sign certain agreements, namely, the Logistic Support Agreement (LSA) and the Communication Interoperability and Security Memorandum of Agreement (CISMOA), terming them as restrictive on India’s strategic autonomy. The US maintains that such agreements are essential for the transfer of cutting-edge technology to India. An amicable solution, acceptable to both nations, needs to be found.

Realistically, no two nations, more so two large, independently-thinking democracies as the US and India, can ever hope to agree across the full spectrum of issues in their bi-lateral relations. Opposition to matters of substance and sensitive issues, such as military cooperation, is more likely to be from domestic challengers seeking partisan advantages. Policy makers and citizens of both nations, USA and India, would do well to recollect the wisdom of Ralph Waldo Emerson who argued that, “A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines,” before moving onto the next contentious issue.