An expected increase in India’s defence spending due to the current stand-off with Pakistan has presented a “tremendous opportunity” to major U.S. companies including Boeing, Lockheed Martin and Raytheon to expand their Indian operations, according to the U.S.-India Business Council (USIBC) President Mukesh Aghi.
“Due to the current situation, India’s spending in defence and security will go up dramatically,” Mr. Aghi said in an interview. “ ...the technology on big ticket items will definitely come from the U.S., either from the aircraft carriers or secured communications or from the missile side.” “The opportunity for U.S. companies is tremendous,” he said. “We are trying to bring in the SMEs into India because in the U.S. the SMEs have an ecosystem around Boeing or Lockheed Martin or Raytheon to supply components and technologies. That ecosystem has to be built in India.”Trade ties
The USIBC is a business advocacy organisation working to boost India-US ties. The U.S.-India Trade Policy Forum (TPF) is slated to meet next week. The TPF is the main bilateral forum for ‘discussion and resolution of India-US trade and investment issues.’
Mr. Aghi said with the government’s objective to bring in more efficiency in the defence sector through private companies, the Tata group, the Reliance groups and other Indian firms were forming ventures with foreign partners in the sector to boost investments and manufacturing in India.
In June, the Centre had liberalised the defence sector by allowing foreign investment beyond 49 per cent through government approval in cases where the country gets access to modern technology.
In the last two years, the defence sector attracted FDI worth only a little over Rs one crore. Besides, out of the $288.5 billion worth FDI into India during April 2000-March 2016, FDI into defence was a mere $5.12 million (or Rs.25.48 crore), with a rank of 61 of the 63 sectors under which FDI inflow was tabulated.
Mr. Aghi said defence minister Manohar Parrikar had lauded a USIBC report on suggestions to improve ease of doing defence business in India, including proposals to maintain transparency, eliminate corruption and expediting government’s decisions on big defence purchases.
He warned that a lingering ‘Bofors Syndrome’ - or a near freeze by officials in procurement due to fear of a corruption tag - could harm the Centre at a time of escalating tensions between India and Pakistan. Mr. Aghi said U.S. firms across sectors did not perceive any risk to their Indian operations due to the India-Pakistan stand-off as “they see maturity on the part of Indian and U.S. leaderships as well as due to talks with China and Pakistan to ensure the situation doesn’t go out of control.”