Defence deals overtake 123

By Asok Malik

Constant and unrelenting pressure from corporate India is one of the key factors keeping alive hopes of the India-United States nuclear deal. Indeed, as a senior Ministry of External Affairs (MEA) official put it, "While the focus may be on civil nuclear cooperation and arms purchases, the sinews of the strategic relationship are really being built by corporate collaborations."
As evidence, both Government and business sources pointed to February's Defexpo 2008 - India's flagship defence exposition - and the flurry of MoUs signed between Indian and American companies. For instance:

· The Faridabad and Roorkee-based Precision Electronics has tied up with Raytheon to develop military communication technology.

· The Tata Group has announced plans to manufacture helicopter cabins for the Sikorsky Aircraft Corporation - maker of the well-known Black Hawk helicopters. The Tatas have also formed a joint venture with Boeing to manufacture defence-related aerospace components. In addition, they have joined hands with Israel Aerospace Industries to "manufacture and develop missiles, pilotless aircraft, electronic warfare systems ... and other defence equipment".

· The public sector Bharat Earth Movers Limited (BEML) has tied up with General Dynamics to make armoured patrol vehicles for use in difficult terrain.

While similar arrangements have also been announced between Indian and European companies, the "bulk of the agreements are with the Americans" "It is important to note," said an MEA source, "that these are not Government-to-Government technology sharing protocols. These are purely commercial deals between business corporations."

The slew of MoUs, sources said, is indicative of two things. First, it suggests a tacit approval from Washington, DC. Say 20 years ago, State Department and Pentagon bureaucrats would not have been as relaxed about sharing military-use know-how with Indian companies.

Second, as a senior official said, "In part, the American companies are anticipating offset commitments should they get Indian defence orders. Even otherwise, the commercial logic of outsourcing in IT and component manufacture is compelling, and so they are looking to India."

"Offset commitments" is the term for compensatory obligations a foreign company must incur in India when it wins a large Government order. Boeing, for example, makes the F-18 combat aircraft, which is in contention for a Rs 40,000 crore order from the Indian Air Force.

The implications of the Defexpo MoUs could be felt in the years to come. By plugging into the American military-industrial complex, Indian companies and Indian capital are likely to develop a stake in its success, sources argued, and create both a momentum and a stronger lobby for India-US strategic relations.

It could also push the political establishment into a strange dilemma if American military products, with Indian-made components, are accepted as superior and bought by third countries, but ignored in India itself. In a hypothetical situation, said one analyst, "Buying from the Russians on political rather than technological grounds will become more difficult if the competing equipment uses components and elements made by Indian companies and Indian labour."