US Dominates India’s Arms Bazaar

The Amerian aerospace giant Boeing is to sell 37 military helicopters to India, a major blow to Premier Narendra Modi’s high-profile “Make in India” campaign to wean the country off imported arms.

The deal for 22 Apache AH-64Ds and 15 Chinook CH-47F heavy-lift aircraft, which has been bottlenecked for years because of red tape, will further entrench American presence in the burgeoning Indian defense market, military analysts say.

New Delhi scrambled to get the deal through as Boeing had threatened to ramp up the price after Sept. 30 by nearly 40 percent after holding it steady for nearly six years. The big-ticket purchase will take the tally of defense contracts won by American companies from India to US$10 billion over the past decade.

The transaction will have two components — one with Boeing for the helicopters and a second contract with the US government for the helicopters’ weapons and other equipment. The AH-64 Apache is the world’s most advanced multi-role combat helicopter, boasting night vision capability, stealth characteristics and beyond-visual-range missiles. The workhorse CH-47 F Chinook, which has played a crucial role for the US Army and Marines since it came into service in 1951, is a twin-engine equipped with a fully-integrated digital cockpit management system.

Interestingly, the contract comes at a time when Modi is on a visit to New York, where he will meet US President Barack Obama ahead of the United Nations General Assembly. The Indian premier will also travel to Silicon Valley on the West Coast, to hobnob with American IT chiefs and promote India as an attractive business destination to help revive the economy.

Since Modi’s inauguration last May, his nationalist government has approved an assortment of military projects that had stalled under the previous Congress regime, in part over corruption scandals. New Delhi also lifted the cap on foreign investment in the defense industry to 49 percent and bolstered tie-ups between foreign and local companies. The overarching reason behind these multi-million dollar deals lies in geopolitical compulsions, said a ministry of defense official who preferred that his name not be used.

"India's hostile neighborhood consists of a nuclear-armed Pakistan and big-spending China,” the official said. “The two are also in a campaign to form an antagonistic nuclear and defense partnership. Already, 54 percent of Chinese arms exports go to Pakistan. So in such an environment, India fears its scarcity of fighter jets, submarines, helicopters and howitzers etc. will reek of a lack of defense preparedness."

India, now the world's largest arms importer, expects to spend US$130 billion over the next decade to upgrade its Soviet-era fleets of fighters, sea vessels and war machinery. The country's volume of major weapons imports more than doubled between 2009 and 2013 while its share of the volume of international arms imports increased from 7 percent to 14 percent, according to the Stockholm International Peace Research Institute.

India's military spending in the draft budget for fiscal 2015 rose 7.7 percent from the previous year to Rs2.46 trillion, equal to about 1.8 percent of the country's gross domestic product, roughly 2.7 times the level of fiscal 2007.

Modi's government is also prioritizing the deregulation of foreign direct investment in the defense sector and attracting private sector resources. Ironically, India's helicopter deal with the US is in stark contrast to the one New Delhi inked recently with Russia, India's largest arms supplier. Under the Russian agreement, both New Delhi and Moscow have agreed to manufacture 200 helicopters in India with Russian collaboration as part of intensification and diversification of strategic ties. The agreement is part of the 'Make in India' program.

In the light of the Russian deal, as well as Modi's push for domestic production, the Boeing chopper pact raises questions about the need for spending such whopping sums on defense acquisition. "Continued reliance on foreign suppliers exposes India's lack of a clear-cut vision of its defense industry," said a former Indian Army officer, Pravesh Bishnoi, who was posted in Ladakh during the Kargil War.

"Even today Russia continues to be one of India’s most significant strategic partners and the biggest arms supplier, grabbing about 75 percent of its weapon imports. The remaining 25 percent is made up of the US and Western European countries, particularly France, Britain and Germany. Do we really need so much equipment? If we do, why not make it at home?"

Given India's propensity for big-ticket defense purchases, American defense giants such as Lockheed Martin and Boeing, are all too thrilled about the vast business potential in Asia's third largest economy. Unsurprisingly, the US has now emerged as India’s second largest arms supplier, accounting for 7 percent of the total.

Such expensive defense procurement is a double-edged sword, Bishnoi said. "The purchases may have augmented India’s defense capability, but it has scuppered indigenous research as technology has been imported rather than developed here. The domestic industry gains zilch from such deals. On the contrary, it only creates rancor among private players who have been keen to leverage Modi's ‘Make In India’ mantra."

Some defense analysts feel that India is “arming without aiming” or ploughing money into military purchases without a serious effort to reinvent its strategy.

"India is being torn by two conflicting goals: the nationalistic aspiration to produce weapons locally and the urgent need to modernize militarily, said Charat Bharadwaj of the Institute of Defense Studies & Analysis, a New Delhi-based think tank. “Procurement of more mega-weapons to meet traditional security challenges is meaningless without a strategic dimension.”

Adding to the confusion is the government's ambiguity over what exactly its short-term policy about such imports is going to be. Last August, Modi's government surprised many by abruptly scrapping the request for global bids to buy helicopters that the defense department had been shopping for over the past 10 years, in favor of manufacturing them domestically. India also reversed two more proposals for buying transport aircraft and submarines and decided to make them at home.

What irritates many is how India’s security interests are being advanced by sacrificing a solid domestic arms-production base because of the country's dependency on imports from Russia and the US. The biggest gainer seems to be the US.

Policy analysts say that to be prudent, India should freeze all purchases of mega defense equipment to first strategize its priorities. Cleaning up the defense procurement system, encouraging domestic players to invest at home and building a sound manufacturing base are the way to go. For this India need look no further than its archrival China, which has transformed itself from a major arms importer about 10 years ago to become the world's third largest exporter.

New Delhi-based senior journalist Neeta Lal was a nominee for SOPA Awards 2014 & World Media Summit Awards 2014