Obama to push for more defence deals with India in 2nd term

India on Wednesday congratulated Barack Obama for winning a second term in the White House hoping the economic and defence ties between the two countries will be furthered.

Obama has been instrumental in pushing through defence deals worth $10 billion with India in his first term creating thousands of jobs back home. Many of the defence deals with the US are still in offing.

Prime Minister Manmohan Singh also congratulated Obama – with whom he shares a special equation -for his re-election. “I have no doubt that there is much more we can do together to further strengthen the India-U.S. partnership and thereby advance peace and stability, expand mutual economic opportunities, harness the potential of science and technology, innovation and higher education and empower our people to address global challenges,” Singh said in his congratulatory message. 

Obama has also been pushing for better relations with India as was evident during his four day presidential tour – the longest overseas visit by him as President. Obama, who broke the racial ceiling for being the first Black elected President in the White House, also expressed his solidarity with India in countering terrorism.

As per keen watchers of the defence industry, there will be “renewed thrust” from Obama on signing of more defence deals with India to help the economic crises back home. The total defence trade between the two countries in last 10 years has been $ 10 billion and in 2011 only India has purchased military equipments worth more than $4.5 billion from the US. The big ticket deals signed with the US in the last five years been eight P-8I maritime surveillance and anti-submarine warfare aircraft from Boeing valuing $ 2.1 billion. India is also buying 10 C-17 heavy-lifters from Boeing for $4.1 billion. The six C-130 J special operations aircraft valuing $ 1.2 billion have already arrived in the country and order for six more is in the offing. India is also planning to place an order for M777 ultra light howitzers for $ 700 million to augment its firepower in the mountainous terrain.

The US firms have also emerged as the chosen one for supplying the attack helicopters and the heavy lift helicopters for the Indian Air Force.

In a gesture to reciprocate, the US also eased its US Export Controls and Technology security policies towards India and removed premier Defence Research and Development Organisation and Indian Space Research Organisation (ISRO) from the Commerce Department Entity List.

The US earlier this year unveiled a new military strategy for Asia-Pacific under the leadership of Obama giving a more pivotal role to India to counter the rise of China. The US has been all out trying to woo India by stepping up bilateral defence trade and cooperation. The US also underlined its commitment towards the modernization of the Indian Army.

With the US set to pull out its troops from strife-torn Afghanistan by 2014 end, it has been urging India to play a greater role in stabilizing the country. So far India’s involvement in Afghanistan has been limited to economic and soft skills development. The US is keen on New Delhi’s help in training Afghanistan police and Army.

US defence firms closing down offices in India?

The global economic slowdown and convoluted acquisition processes of Indian Armed Forces has compelled the US defence giants in India to either pack up their offices or cut down manpower drastically.

The six Lockheed Marting C-130Js purchased from the US through FMS route

As procurement programmes of the Indian forces are becoming a game of ‘snake and ladder’ where tender cancellation and retendering has happened quite often, the US firms are relying more on the Foreign Military Sales (FMS) or government-to-government sales route. Facing economic slowdown back home these firms have been advised to pack up from India or at least cut down expenditure. Among the defence giants likely to cut down their staff in the country significantly include Northrop Grumman, Lockheed Martin and Boeing.

“The US aerospace firms were relying heavily on the MMRCA (medium multi-role combat aircraft) deal. But the high sales pitch fell flat as the IAF chose the French fighter jet. Thereafter the deals bagged by the US firms have not been through competitive bidding but through government-to-government sales,” sources in the market said.

The big ticket deals signed with the US through the FMS route have been eight P-8I maritime surveillance and anti-submarine warfare aircraft from Boeing valuing $ 2.1 billion. India is also buying 10 C-17 heavy-lifters from Boeing for $4.1 billion. The six C-130 J special operations aircraft valuing $ 1.2 billion have already arrived in the country and order for six more is in the offing. India is also planning to place an order for M777 ultra light howitzers for $ 700 million to augment its firepower in the mountainous terrain. In total Indo-US defence trade has been worth $ 10 billion and in 2011 only India has purchased military equipments worth more than $ 4.5 billion.

Though no company is openly accepting the cut down, sources confirm that starting with Northrop Grumman they have decided to cut down as fast as possible. Northrop Grumman had opened office in India in 2007. Lockheed Martin and Boeing are also focusing on deals through FMS route.

“In India the competitive tendering is still in formulative stage where the process takes years at length. So the efforts are more. However, we have realized that India will come to the US for weapons and platform it desires and FMS route is giving more dividends and saving time for both sides,” added company sources requesting anonymity.

Boeing's AH-64 Apache helicopter is frontrunner in the 22 attack helicopters tender of the IAF

Cutting down spending on maintaining big offices in India, the US along with many European defence firms have shifted focus to the Middle-East and the South American country. The BAe Systems is also expected to cut down their staff and in six months might go back as there is nothing significant happening for them in India, unless Eurofighter makes a re-entry in the “Mother of all Deals” – $ 20 billion order for 126 fighter jets.

“The Middle-East region is perpetually volatile and there have been sustained demands from these countries. Also South American countries have also shown interest in the US military hardware – making them desired market for us,” added the sources.