Gates Butters Up India for U.S. Guns

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U.S. Defense Secretary Robert Gates Getty Images

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Strengthening U.S.-India Alliance

C. Uday Bhaskar, security analyst and former director of the New Delhi-based Institute for Defense Studies & Analysis, stresses that it is highly desirable for both the U.S and India to deepen their military ties. India needs to lessen its dependence on Russia for weaponry, and to obtain the latest technology, in which the U.S. leads. It will take some time for the U.S. to replace Russia as the premier arms supplier to India. But India is leaning increasingly towards Washington.

Helping that goal along is corporate India, with a new interest in India's defense business. In 2003 New Delhi privatized defense manufacturing and purchase so India could build up its own industry. New Delhi has stipulated that successful foreign bidders on weapons deals must reinvest 30% of the value of any contract worth more than $70 million in India-based manufacturing, so weapons technology and skills can develop at home.

Consequently, foreign companies have been scanning the radar for suitable local partners. And there are plenty in India. In the last week the $50 billion Tata group struck five deals, including a $500 million contract with Boeing for arms-related components and one with Connecticut-based Sikorsky Aircraft, to establish an S-92 helicopter cabin production unit. Raytheon's been talking to Indian tech major Wipro , manufacturer Godrej & Boyce, and engineering giant Larsen & Toubro about armaments projects.

It's a business windfall for sure. The Indians see U.S. investments as a way of containing India's militarily aggressive neighbors, China and Pakistan. They also see it as a prestige play for India in the global arena. Indian Defense Review's Verma says that by assigning stakes to "friends like the U.S., Germany, and France, India can leverage its stature in international fora. It's a win-win situation."

Lakshman covers India business for BusinessWeek .