US in Asia Pacific

India-US: DTTI and India's Quest for Self Reliance

30 Apr, 2014    ·   4417

Shreya Upadhyay analyses the importance of co-development and co-production for India's defence sector

Shreya Upadhyay
Shreya Upadhyay
Research Intern
A recent SIPRI report states that India continues to be the world’s largest arms importer while the US, the biggest supplier.  Though it does not paint a happy picture about the ‘patron-client’ relationship, it does signify that a lasting relationship with the US is in order. How will the India-US defence ties play out in the near future? What role can it play in India’s quest for self-reliance in the defence sector?
The Eagle Gains Prominence Despite Prickly Issues
Although Russia was India’s main arms supplier from 2009 to 2013, India has been diversifying its sources, and is looking towards the US for defence purchases, and identifying best available equipment for specific tasks. In 2013, Washington surpassed Moscow as the top exporter, with $1.9 billion sales to New Delhi. 

Despite prickly issues in bilateral relations in recent years – such as the US’ reluctance to accommodate Indian interests on issues such as pharmaceuticals, telecom, visa regimes, and the FDI – defence ties have been on an upswing.  Recently, both countries signed a $1 billion contract for the acquisition of six additional C-130J Super Hercules aircraft. The transaction is expected to rise to $2.3 billion in 2014 and $3.3 billion in 2015; and the bilateral defence cooperation is being billed at an estimated $25 billion in the next decade. 

With US military spending dwindling, the defence contractors are looking at India as an attractive market. Beginning with Raytheon Weapon Locating Radars for the Indian Army in 2004, India has gone on to purchase Lockheed Martin LM2500 marine turbines and power warships, C-17 Globemaster-III heavy cargo aircraft and P-8I Poseidon Long Range Maritime Reconnaissance and Anti Submarine Warfare aircraft, among others.  

The US calls India a 'strategic partner' and 'lynchpin' to its Asia-Pacific rebalancing strategy. This has facilitated defence technology transfer, which was, earlier, tightly controlled. The US lists India among the eight countries for whom technology exports are not restricted.
A glance at recent US Quadrennial Defence Review reports reflects an increasing interest in India. In 2001 there was no mention of India. In the 2006 document, India was defined as, “emerging as a great power”. In the 2010 document, it was referred as the “net provider of security,” and in 2014 a more pragmatic engagement based on “Defence Trade and Technology Initiative (DTTI).” There has been a shift from the present ‘buyer-seller’ relationship to a substantial co-development and co-production model (CDCP) encouraging high-technology joint research and development.  

Divergences in India-US Defence Trade
The DTTI intends for Indian defence companies to collaborate with US partners in five co-production ventures, where the US would provide technology and guidance for building weapon systems.  The Pentagon initiative argues that co-production would bring high technology, upgrade Indian defence manufacturing sector and familiarise the companies with best global practices, while giving a boost to Indian defence exports. 

However, there has been a studied silence from India. Many suspect that the US is tacitly making a back door entry into the Indian market, circumventing the Defence Procurement Procedure (DPP) which aims at reversing the trend of importing equipment and weapon system and giving the first opportunity to the Indian industry.
Additionally, the US has been asking India to sign agreements such as the Logistic Support Agreement (LSA) and the Communication Interoperability and Security Memorandum of Agreement (CISMOA). New Delhi fears that these would restrict India’s strategic autonomy while Washington claims that such agreements are essential for the transfer of cutting-edge technology to India.  
The US industry has also shown its objection to India's Offset Policy, procurement processes and FDIs. As India strives for indigenisation, US companies face Indian expectations of 30 per cent offset packages. This combined with a 26 per cent cap on FDI in the defence sector limits the interest of US companies to fulfil Indian requests for high-technology defence articles. 

Technology Transfer: A Road to Self-Reliance 
The SIPRI report shows India’s continued failure to build a robust Defence Industrial Base. There have been no meaningful systemic efforts to reform and revamp existing defence structures such as Defence Research and Development Organisation facilities, ordnance factories, among others to ensure they deliver weapon systems without high costs and time overruns. In 2001, the defence industry was opened for the Indian private sector but procurement policies have remained largely skewed in favour of the Defence Public Sector Undertakings.
This explains why India continues to import most of its military hardware and software, which also makes it vulnerable to supply lines being choked in times of emergency. However, if put to practice, the DTTI can spur greater technology transfer and thus help recipient learn the "know-how" of developing certain classes of equipment.    

Co-development and co-production remain the best bet in indigenising defence technologies but that requires India to free its defence sector from the self-imposed regulatory constraints. If India allows FDI cap to be raised to 49 per cent, it will promote joint ventures between Indian and foreign defence firms. Such a move will also enable India-based private firms to expand their presence in the defence production sector. With multiple domestic and international players engaged in healthy partnerships, coupled with competition to provide the best weaponry for the armed forces, India can move towards the much sought after self-reliance in the defence sector.