Thomas White Global Investing
India Stamp
March 25, 2011
A Postcard from the Asia Pacific
India: Aerospace and Defense Ties with the U.S. Take Wing

India-US Defense relationship on the rise

The Lockheed Martin F-16 IN Super Viper, a customized version of the highly popular F-16 fighter, is one of the contenders to join the Indian Air Force in a deal potentially worth $20 billion.

As the F-16 Flying Falcon aircraft soared above them in a vertical climb and almost disappeared into the light blue sky, the nearly 100,000 spectators at the Air Force Station in Bangalore broke into rapturous applause. The fighter, bearing U.S. Air Force insignia and part of the Pacific Air Forces Demonstration Team, had flown in from its base in Japan just for the Aero India exhibition in February. As the Flying Falcon descended rapidly and prepared to land, an announcer with a distinct American drawl started warming up the crowd for an even more thrilling encore. Moments later, the twin engines of the F/A-18 Super Hornet thundered above as the U.S. Navy fighter banked tightly to the left immediately after takeoff, and went on to enthrall the crowd with splendid combat maneuvers.

This was not merely an exhibition. These American aircraft are among the six contenders to become the next multi-role fighters of the Indian Air Force. The initial contract for 126 aircraft is likely to be worth close to $11 billion, but the order may eventually go up to 200 aircraft worth as much as $20 billion. If either of them wins, the deal may support thousands of American jobs for several years. But, as may be expected, competition is intense and manufacturers from Russia, France, Sweden, and a European consortium are all vying for one of the biggest defense deals in history.

India’s growing stature as a regional military power and the persistent risks of instability across some of its borders have awakened the government to some of the shortcomings of its defense forces. Its relatively less developed domestic defense manufacturing industry has forced the country to seek foreign suppliers for critical equipment. Though the country boasts of one of the largest militaries in the world, the bulk of the equipment is of Soviet origin and hence outdated. Realizing the strategic significance of maintaining the country’s military edge over most of its neighbors and to keep pace with China’s growing arsenal, the Indian government has undertaken a massive overhaul of its defense capabilities. India has been the biggest defense market since 2006, and may spend as much as $80 billion more over this decade on defense equipment.

In the past, there would have been no competition for these contracts, as the Soviet Union, and subsequently Russia, would have been the preferred supplier. That has changed. The United States has gradually become one of the biggest defense suppliers to India as the two countries have built a close relationship in recent times. Just over the last couple of years, India has ordered American military equipment worth nearly $10 billion. This has included the C-17 Globemaster III strategic transport aircraft and P8-I maritime aircraft from Boeing, besides the C-130 J Super Hercules transport aircraft manufactured by Lockheed Martin.

India has also become one of the largest civilian aerospace markets globally, as the country’s growing economy fuels demand for commercial aircraft and space technology for civilian use. One of the country’s fast growing domestic airlines recently placed a $15 billion order for as many as 180 aircraft, to follow its 2005 order for 100 planes. While both these orders were won by European Airbus, American manufacturer Boeing has a nearly equal share in the overall Indian aviation market. India’s government-owned Air-India flies mostly Boeing aircraft in its international routes, while two of the major domestic carriers have an all-Boeing fleet. In the area of space technology, the U.S. and India have been sharing satellite data for climate monitoring and land imaging for several years. Also, encouraged by the success of India’s unmanned mission to the moon, which carried the NASA probes that discovered water around the lunar pole, the two countries are committed to collaborate in future space explorations.

The expanded relationship between the world’s oldest and largest constitutional democracies, strengthened by high profile visits by successive U.S. presidents, is also becoming increasingly mature. The 2005 New Framework for the U.S. – India Defense Relationship signed between the two countries formalized their defense cooperation by identifying specific areas and programs to deepen the strategic ties. Under this agreement, policy groups formed with senior representatives from both sides have been discussing strategic issues of mutual interest while the exchanges between their militaries have never been stronger. Excluding exercises with its NATO allies, the U.S. now conducts more joint military exercises with India than any other country.

As noted in the 2009 joint statement by President Obama and Prime Minister Singh of India, ‘the common ideals and complementary strengths of India and the United States today provide a foundation for addressing the global challenges of the 21st century’. As it is built on shared values like democracy and respect for fundamental freedoms, this relationship holds the promise of promoting a more secure, peaceful, and prosperous future for both countries.


Image Credit: Lockheed Martin Corporation

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