Bloomberg News

India Buys U.S. Weapons in Face of Tough Rules, Ambassador Says

January 29, 2014

India Buys U.S. Weapons in Face of Tough Rules, Ambassador Says

India’s military modernization largely depends on U.S. equipment, even though the Defense Department’s rules for arms sales can be onerous, India’s new ambassador to the U.S., S. Jaishankar, said today. Photographer: Andrew Harrer/Bloomberg

India’s military modernization largely depends on U.S. equipment, even though the Defense Department’s rules for arms sales can be onerous, India’s new ambassador to the U.S., said today.

“If you look at our defense purchases, a lot of it is centered around U.S. sourcing,” Ambassador S. Jaishankar said in an interview at Bloomberg’s Washington office. “Frankly, the U.S. system was so difficult to navigate,” he said of his role in negotiating arms purchases from the U.S. “When you’re selling me something, you’re the salesman and I’m the customer, and I’m supposed to be the difficult one.”

Even with those restrictions, India is buying a fleet of U.S. military transport and surveillance planes, making it one of the largest operators of such aircraft after the Pentagon, said Jaishankar, who’s been in the position for a month and previously served as India’s ambassador in Beijing.

Loosening U.S. arms export regulations and restrictions on transfers of military technology to the South Asian nation has been at the heart of the U.S.-India relations since 2005, when the two countries improved ties and reached an agreement that allows India, a nuclear-weapons state, to buy reactors and nuclear material for its energy industry.

U.S. defense officials, including former Defense Secretary Leon Panetta, have acknowledged India’s irritation over controls on the transfer of U.S. military technology at a time when the Obama administration is seeking a greater role for India in the Asia-Pacific region.

Streamlining Processes

During a 2012 visit to India, Panetta said the Pentagon was undertaking an effort to “streamline our bureaucratic processes and make our defense trade more simple, responsive, and effective.”

Panetta also said U.S.-India ties would move beyond a seller-buyer relationship to “substantial co-production and, eventually, high-technology joint research and development” of weapons.

India is buying 10 C-17 transport planes, valued at about $5.8 billion, making it the largest operator of the aircraft after the U.S. Air Force, and eight P-8I maritime surveillance aircraft, both made by Chicago-based Boeing Co. (BA:US) It’s also buying six Lockheed Martin Corp. (LMT:US) C-130J transport aircraft valued at about $1.2 billion.

Boeing and Lockheed lost out in 2012 on a $11 billion Indian order for 126 jet fighters to Dassault Aviation SA (AM) of France, maker of the Rafale.

‘Disappointed’ Contractors

Although U.S. defense contractors were disappointed that India chose a French jet over theirs, “they have gotten over it,” Jaishankar said. The U.S.-India relationship “cannot run on the basis of ‘you owe me,’” he said. “It has got to run on a much more equitable basis on what works for both of us.”

Trade between the U.S., the world’s largest economy, and India, which is Asia’s third-biggest economy, has grown fourfold since 2005, Jaishankar said. There is room to increase trade and investment between the two nations further, he said, describing it as a “relatively small economic relationship” that has “moved not too badly in the last couple of years.”

“For us to matter to the United States, clearly, this needs to be scaled up,” the ambassador said.

Faster growth in India and improving the environment for foreign companies operating there are ways to attract more investment into the country, he said. India posted growth of 5 percent in the last fiscal year, the slowest economic expansion in a decade.

‘Better Shape’

“There’s got to be strong growth in India,” he said. “We’ve got to get our house in better shape” and “make it easier for business.”

India has taken steps toward this goal, including clearing many large infrastructure projects that were stuck in the regulatory pipeline and addressing the lack of clarity on taxes, which was especially a concern for U.S. businesses, he said.

The start of Jaishankar’s ambassadorial tenure in Washington coincided with the arrest in New York of Indian diplomat Devyani Khobragade, who was accused of visa fraud for allegedly underpaying her babysitter. She returned to India on Jan. 10 after she was indicted.

India has said the charges against the diplomat were not justified, and she shouldn’t have been arrested because she had diplomatic immunity.

The arrest and its aftermath have “created a larger debate and larger questioning of immunities and privileges on both sides because you can’t have one level of immunity for Indian consular officials and a different level of immunity for American consular officials,” Jaishankar said. He declined to specify when those discussions might be completed.

“Just imagine if you woke up one day and read in newspapers or saw on TV that a female American diplomat was pulled in by the Indian police, handcuffed and strip-searched,” Jaishankar said. “What do you think the reaction would be in the U.S.?”

To contact the reporters on this story: Gopal Ratnam in Washington at gratnam1@bloomberg.net; Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net


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  • BA
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