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U.S. Eyes Bigger Slice Of Indian Defense Pie

By Emily Wax,September 26, 2009

NEW DELHI -- In the ballroom of a five-star hotel here, executives from Bethesda-based Lockheed Martin, the world's biggest arms supplier, threw a candlelight reception one recent night to woo Indian defense experts as their country embarks on a major military shopping spree.

India plans to spend an estimated $100 billion on defense over the next decade to modernize its Soviet-era arsenal. With its growing military footprint, India is steering away from traditional ally Russia, its main weapons supplier, and looking toward the United States to help upgrade its weapons systems and troop gear.

As the world's largest democracy, India is seen as the most dependable U.S. ally in a part of the world that also includes Afghanistan and Pakistan, both of which are racked by Islamist insurgencies. But India's expanding military ambitions, and the U.S. role in selling this nuclear-armed nation more firepower, is starting to worry its neighbors, especially perennial rival Pakistan. India also has ongoing border disputes with another Asian giant, China, which defeated it in a short 1962 war.

"This increase in India's military spending is seen with rising anxiety here in Pakistan," said Hasan-Askari Rizvi, a leading defense analyst in Pakistan, which receives substantial U.S. military assistance in its fight against Taliban insurgents in the country's northwest. "As long as India builds pressure on Pakistan militarily, Pakistan won't move troops to fight the Taliban, period. In the future, there could potentially be a situation like the 1965 war between India and Pakistan, where both used American weapons against each other."

India is pushing the Obama administration to ease the acquisition of U.S. weapons and technology. Already this year, a high-level U.S. government group cleared the way for Lockheed and Boeing to offer India cutting-edge radar technology for fighter jets. At the U.S. Embassy in New Delhi, defense contractors such as Northrop Grumman are sponsoring little league baseball teams, the companies' names stitched onto the uniforms.

About 70 percent of India's military equipment comes from Russia, said Sitanshu Kar, a spokesman for the Indian Defense Ministry. But some Indian military officials have complained about the quality and cost of Russian equipment and have advocated a shift to U.S. suppliers.

"We've had a long-standing relationship with Russia. But that's changing now," Kar said.

The country that spawned the Gandhian principles of nonviolence now has a shopping list that includes 126 fighter jets, 155mm howitzers, long-range maritime reconnaissance aircraft, vast cargo planes used in long-distance conflicts, high-tech helicopters and deep-water submarines. Boeing is vying with Lockheed -- along with French, Russian and Swedish companies and a European consortium -- for a fighter jet deal worth about $10 billion.

India is holding flight tests for the fighter jets. Lockheed and Boeing have conducted demonstration flights for Indian celebrities and defense experts. Irrespective of who wins the deal, New Delhi is requiring that at least 50 percent of the contract value be farmed out to Indian companies for goods, labor and material.

After terrorist attacks in Mumbai, India's financial capital, in November, Prime Minister Manmohan Singh vowed to overhaul the country's intelligence service and weaponry. And he has since reiterated the pledge.

"We will do all that is necessary to modernize the security and intelligence services, and that's a commitment which is essential," Singh said after a budget announcement this summer.

Almost every weekend, there are cocktails and closed-door presentations in the suites of New Delhi's five-star hotels, hosted by retired admirals and generals from the U.S. armed forces who now work for defense firms, such as Raytheon and Northrop Grumman.

"America's relationship to India is maturing and expanding. India is an important global player now," said William S. Cohen, a defense secretary during the Clinton administration who is a member of the U.S.-India Business Council's board of directors.

The bond between New Delhi and Washington was strengthened last year with a historic nuclear deal. The deal paves the way for India to grow its civilian nuclear power industry, part of a $100 billion pie, of which the United States is hoping for a large slice.

Defense experts say that India is lagging in the Asian arms race against China. This year, Chinese defense spending reached $71 billion, second only to the United States'. China's military buildup is a concern for both the United States and India, with the latter seen by Washington as a counterbalance to China's growing dominance in the region. India is spending about $29 billion on defense this year, an increase of 25 percent over 2008 but still far below China's budget. India spends about 2 percent of its gross domestic product on defense, while China spent 4.3 percent last year and Pakistan spent 3.5 percent.