GLOBAL DEFENSE MARKET

SPECIAL REPORT: India Manages Diverse Arms Sources for Military Modernization

12/9/2021
By Meredith Roaten
An Indian soldier participates in the 2019 Yudh Abhyas joint exercise at Joint Base Lewis-McChord, Washington.

Defense Dept. photo

This is part 3 of a 4-part special report on the Quad.

India is tapping into a wide array of suppliers in the global arms market, as well as its own indigenous capabilities, as it modernizes its armed forces and squares off with China. The nation’s geography and lack of a formal alliance with the United States allows India the freedom to diversify its sources, but it comes at the cost of creating tension in the burgeoning partnership between Washington and New Delhi, according to defense manufacturers and analysts.

India — the only member of the Quadrilateral Security Dialogue group of nations to share a land border with China — has long been raising the alarm about Beijing’s efforts to project power in the Indo-Pacific, said Richard Rossow, an analyst with the Center for Strategic and International Studies. India was early to call out what many observers now see as Beijing’s ulterior motives with its Belt and Road Initiative — a plan to develop new trade routes between China and the rest of the world — and dealings with vulnerable island nations in the Indo-Pacific such as the Maldives and Sri Lanka, Rossow said.

Now, India is teaming up with nations with similar strategic interests, such as the other members of the Quad group including the United States, Australia and Japan. China has condemned the partnership through state-run media and official statements, he noted.

“There’s nothing that China fears more than the Quad, nothing at all,” Rossow said. “It is the only thing standing between China’s domination of the region and an open liberal system.”

India’s unique position sharing a border with China has affected the country’s plans to modernize its armed forces, he noted. While Beijing has increasingly looked to assert its influence in the maritime domain through obtaining strategic ports in the Indian Ocean, it is simultaneously stepping up pressure in the ground domain. Land forces from the two countries have clashed a number of times in the past two years, resulting in casualties.

The Pentagon included these disputes in its annual China Military Power Report, which was released in November. Beijing is using the disputes to try and “prevent India from deepening its relationship with the United States,” the report said.

Chinese threats coming from both the land and sea have forced the Indian military to split its resources during a time when New Delhi is strategically preparing to modernize its navy, Rossow said.

“A pretty strong border confrontation and escalating tensions at the border is a great way to make sure that some of these nascent steps India was taking towards a stronger maritime strategy are pared back,” he said.

Rahul Roy-Chaudhury, a senior fellow for South Asia at the International Institute for Strategic Studies, said this is the first time in its history that India has seen strengthening its position in the Indian Ocean as a foreign policy priority. Imports to India’s harbors are a growing part of its economy that it must protect with a strong navy, he explained.

But the shift toward the maritime domain from a historically land-centric approach has been met with challenges. Shipbuilding programs notoriously take many years and can be prone to schedule delays and cost overruns, he noted.

India is working through these hurdles by expanding its options with new defense partnerships, Roy-Chaudhury said. The country is already one of the top five arms importers in the world and is looking to build new relationships, he noted.

“India is very keen to encourage other countries to come in” and deepen security cooperation, he said.

India and the United States have recently been strengthening their partnership through foreign military sales of sensitive technology. That could go a long way in modernizing New Delhi’s navy, Rossow said.

For example, the country purchased 24 Lockheed Martin-built MH-60R helicopters — variations of the anti-submarine warfare Seahawk platform — a move that in the past would have likely been prevented by trade restrictions, he said.

Another example is Boeing’s Super Hornet fighter jet, which is being offered for the Indian navy’s carrier-borne multirole aircraft program, he said. The Indian navy released a request for information earlier this year for more than 50 multirole aircraft for its new aircraft carrier the INS Vikrant, which is expected to be operational in 2022 after completing sea trials.

Now that the U.S. government has allowed Boeing to obtain a marketing license for India, the company is focused on determining the Indian navy’s needs for the program, said Surendra Ahuja, managing director of Boeing Defence India. Given that the Indian military works with U.S. forces in the Indo-Pacific so frequently, it would be useful for the two nations’ naval components to share a common platform and have interoperability, he said.

”Think of the possibility that opens up, given that both countries have common interests and common concerns in this part of the world,” he said.

The Pentagon is also examining what other types of technologies it can share with the country through its India Defense Technology Trade Initiative, a campaign “intended to focus senior U.S. and Indian leadership on real opportunities and challenges” facing the bilateral partnership, according to the Office of the Executive Director for International Cooperation’s website. The initiative aims to “eliminate bureaucratic obstacles” and promote collaborative technology and research.

These steps have demonstrated to India that the United States can be a secure partner, Rossow said.

“Uncle Sam doesn’t bend in weird directions for many countries, and we’ve done it in a number of significant ways with India,” he said.

The United States is also solidifying its bond with India through military exercises. Over the summer, the U.S. military held exercises with the Indian navy and air force over the Indian Ocean. Additionally, all four countries in the Quad participated in the annual maritime Exercise Malabar this fall.

Meanwhile, U.S. defense manufacturers have seen the road to India open up despite challenging industrial offset requirements.

India’s Defense Acquisition Procedure 2020 requires companies to utilize a minimum of 30 to 60 percent of indigenous content depending on whether the platform is designed in India, and other factors. However, the policy now also allows foreign investors to own as much as 74 percent of Indian companies.

Early effects of the policy shift can be seen in India’s ongoing defense programs.

For example, the multirole fighter aircraft program, or MRFA, is one of the largest and most competitive in India with six companies submitting their aircraft for consideration. The contract is expected to be worth more than $15 billion for more than 100 platforms.

Lockheed Martin is offering its F-21 — a variant of the F-16 aircraft — for India’s exclusive use, said William Blair, vice president and chief executive at Lockheed Martin India.

India’s foreign investment cap and indigenous content requirements are significant factors for Lockheed Martin and other defense manufacturers’ eyeing future procurements, Blair said. In particular, keeping up with the nation’s policies may prove difficult. While procurement reform has moved quickly in India, it has been a challenge to follow the frequently shifting offset requirements, he said.

“Too often, it doesn’t move at the pace that we need to be able to close on these agreements to really deliver the capability,” he said.

But it is clear that the Ministry of Defence is working to close the gap, he said.

“The opportunity and the challenge going forward is to translate the prior success to more of an acceleration of production in India to meet Indian requirements as well as export goals,” Blair noted.

Lockheed is invested in a joint venture with Tata Advanced Systems to produce several aircraft, including the C-130J Super Hercules. The system was produced with about 90 percent indigenous content, Blair said. Tata also entered a joint venture with Boeing to produce Apache helicopter fuselages in India.

To increase its ability to meet indigenous content requirements, Boeing is in “nascent” talks with defense public sector undertakings, or government-owned corporate enterprises, about sharing technology to create the raw materials needed for defense manufacturing, Ahuja said.

“There is enough mineral availability, but ... converting that mineral into raw material is a technology that India at the moment doesn’t have enough of,” he said.

The company works with 275 Indian suppliers directly and is attempting to make its own supply chains more
resilient. It currently sources about

$1 billion worth of components from India, he noted.

Sweden’s Saab tossed its Gripen aircraft into the ring as a low-cost option for the multirole fighter, said Ola Rignell, Saab’s country manager for India.

While Rignell agreed indigenous content requirements for equipment are hard to meet, it benefits both the company and India to be able to cooperate on training and technology development centers. India gets jobs and experience with new technology, while the contractor can advance its own technological capabilities.

For example, Saab partnered with local company Tech Mahindra to create the Saab India Technology Center in Hyderabad. Researchers and engineers develop software and hardware primarily for export, which benefits the Indian economy as well as Saab, Rignell explained.

“It has become more and more clear for all foreign [original equipment manufacturers] that if you want to do business in India, you need to be present, either by having your own company in India or having an Indian prime,” he said.

The border conflict with China is having an impact on India’s defense needs, Ahuja said. Boeing’s Apache and Chinook helicopters already support operations related to the disputes at the border. As concerns about the conflict ramp up, Boeing and the Indian army are in talks about purchasing more of the platforms, though there is “nothing firm yet,” he said.

India also wants to expand its opportunities in the final frontier: space. Reports of China’s development of anti-satellite weapons and creation of space debris have been a catalyst for India to look beyond its borders for cooperation in developing technology for space, said Rajeswari Pillai Rajagopalan, director of the Centre for Security, Strategy and Technology at the Observer Research Foundation in New Delhi.

“China has been investing in a significant amount of counter-space capabilities, including anti-satellite capabilities … [as well as] other electronic and cyber warfare capabilities,” she said. “What China has been doing has been an important driver in pushing India to have a constant monitoring capability to understand what is going on in space.”

For example, India and Japan’s space agencies are cooperating on missions to the Moon in 2024 that will open the doors for working together on technology to enhance situational awareness, she noted. India — not unlike the United States — is looking for new partnerships with private space companies to shore up its manufacturing capacity, she added.

Meanwhile, New Delhi’s long history of keeping its options open will require a delicate balance to continue to strengthen ties with the Quad.

This includes India’s relationship with Russia. Despite the 2017 Countering America’s Adversaries Through Sanctions Act, India is poised to purchase a $5.4 billion set of S-400 surface-to-air missiles from Moscow — the same type of system that derailed Turkey’s procurement of F-35 fighter jets. While it’s not guaranteed India will get a waiver exempting it from sanctions, U.S. lawmakers wrote to President Joe Biden asking him to support the country’s purchase of the system.

Co-chairs of the India Caucus Sen. John Cornyn, R-Texas, and Sen. Mark Warner, D-Va., urged the administration to support alternatives to Russian equipment and waive sanctions as “a national security imperative.”

“Imposing sanctions at this time could derail deepening cooperation with India across all aspects of our bilateral relationship,” they said in a joint statement in October.

However, India has made progress on slowing sales from Russia — there was a 53 percent drop in Russian arms exports to India from 2016 to 2020 compared with the preceding five-year period, according to the Stockholm International Peace Research Institute’s latest annual “Trends in International Arms Transfers” report. But the business dealings are not something that will easily go away, said Manjari Chatterjee Miller, senior fellow for India, Pakistan and South Asia at the Council on Foreign Relations think tank.

Already procured platforms will require maintenance and parts replacement, meaning sidelining Russia completely is not an option, she noted.

But dampening the countries’ relations is possible with the right incentives, she said.

“The quid pro quo here is going to become very important in the long run,” she said. “What will the U.S. provide India if India in turn starts decreasing its reliance on these diverse sources of defense?”

Additionally, the increased cap for foreign investment in Indian defense companies has the potential to boost arms deals between the two countries, Chatterjee Miller said.

“Because the U.S.-Indian strategic partnership is becoming stronger and stronger, I absolutely think that there continues to be massive potential for defense industries to actually collaborate with … Indian companies on the ground,” she said.

If the United States decides to forgive New Delhi’s actions, it will have to balance the benefit of protecting an important partner with the risk of setting a bad example for other countries, she noted. It could hurt the United States’ reputation if other nations believe Washington is applying different standards based on its own strategic interest.

 

India Could Mitigate U.S. Supply Chain Woes

India’s fortification of its manufacturing capacity could open up new supply chains for the United States, analysts say.

Supply chain problems stemming from the COVID-19 pandemic have hit every industry. The issue has become so severe that President Joe Biden issued an executive order earlier this year calling for research to make supply chains more resilient.

Given recent delays and issues with Chinese supply chains, India has seen an opportunity to step in. Prime Minister Narendra Modi called India a “trusted source in the IT and pharmaceutical supply chains” at the G20 conference in October. India also partnered with members of the Quadrilateral Security Dialogue — which includes India, the United States, Australia and Japan — to create the Supply Chain Resilience Initiative after the pandemic hit.

India’s interest as an alternate supply chain comes from its ambition to open up its economy, said Abhay Kumar Singh, a retired commodore in the Indian navy and research fellow at the Manohar Parrikar Institute for Defence Studies and Analyses. New Delhi wants to become more competitive in its ability to establish supply chains in areas like information technology, he said.

“There has been a realization that over-dependence on one single source supply is not good enough, and we need to diversify,” he said.

However, for India to truly have an impact on U.S. supply chains, it needs deregulation, said Richard Rossow, senior fellow and Wadhwani Chair in U.S.-India Policy Studies at the Center for Strategic and International Studies. State governments are more focused on regulations that benefit rural farms rather than “building a domestic modern economy.”

“A lot of things we rely on China for, India does as well,” he said. “We would like to see diversification.”

A strategic technology working group within the Quad is building up awareness of India’s supply chain potential, but there is “nothing to show for it yet,” Rossow said.

The country aspires to have science and technology expertise but needs more investment in its research institutions and students, Singh said.

This is why the Biden administration’s STEM scholarship for students in Quad countries to study at top U.S. universities was a “welcome step” for the country, he noted.

Additionally, India has a unique opportunity to mend relations with a close U.S. ally, France, who was hurt by a recent nuclear submarine deal between the United States, Australia and the United Kingdom.

After the French were cut out of the submarine deal to provide Australia with eight nuclear-powered submarines, India’s long-standing business and diplomatic partnership with the country makes it a natural choice for building back a level of trust and cooperation — alongside Japanese counterparts who also have ties to the nation, Singh said.

India and Japan can “assuage her ruffled feathers to some extent,” he said.

In addition to its material prowess, India also brings a geopolitical heft that the Pentagon and the rest of the Quad can benefit from, said Rahul Roy-Chaudhury, a senior fellow for South Asia at the International Institute for Strategic Studies. While Japan and Australia have influence in the Pacific Ocean, India is considered a leading power in the Indian Ocean, an area where China is seeking to assert its influence.

“You have really an environment where India is the dominant naval power and a leading power in the region,” Roy-Chaudhury said.

Besides its military, India’s commercial sector could help its Quad partners move their advanced technologies forward.

William Blair, vice president and chief executive at Lockheed Martin India, said the company has had a hand in supporting the nation’s flourishing startup culture through support of the India Innovation Growth Program, a public-private technology accelerator. The program has sponsored innovation challenges that have created more than 400 business agreements and $1 billion for the country’s economy, he said.

“You have to really recognize the ingenuity and the innovation engine that exists here in India,” he said.

Commercial development is sparking advancements in areas like artificial intelligence, machine learning, quantum computing, cybersecurity and space that have the potential to be applied to defense needs, he said.

“You’re going to see that growing significantly here in India over the next decade,” he said. “The applications are still being dreamed of that are going to come out of a lot of the innovation efforts here.”

Part 1 - The Quad: Creating a Defense Tech Alliance to Stand Against China

Part 2 - U.S., Japan Set to Enhance Cooperation on Military R&D

Part 4 - U.S., Australia Increasing Tech Transfer to Take on China

 

Topics: Global Defense Market

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