Source: DTN News / Lalit K Jha/PTI / Washington
(NSI News Source Info) WASHINGTON - February 26, 2010: Buoyed by its armament majors securing multi-billion contracts, US has asked India to raise its cap on foreign direct 
investment (FDI) in defence sector to 49 per cent from existing 26 per cent.
Making a pitch for this, the Obama Administration also wants India to undertake more sweeping reforms to attract new investments, saying this will propel New Delhi to a higher growth rate.
"Reforms to date have made Indian companies leaders in areas such as IT, pharmaceuticals, telecommunications, and now increasingly, in manufacturing as well as in clean energy. We hope India will seize the opportunity to undertake new reforms that will both attract new investment and propel higher growth," Assistant Secretary of State for South and Central Asia Robert Blake has said.
He was more particular on opening up of the defence sector, saying, "we are urging the Indian government to raise the cap on foreign equity in Indian defence firms from 26 per cent to 49 per cent to provide more opportunities for US companies interested in defence sales in India."
His comments at the Washington International Business Council meeting come as US defence majors Lockheed Martin, Boeing and other firms have bagged almost all the major Indian armed forces contracts worth more than $10 billion.
These includes sale of Hercules C-130 J transport aircraft and Boeing P-8A maritime reconnaissance aircraft. US companies are in strong contention for sale of next generation fighter aircraft to the Indian airforce.
Noting that the US recently had some important sales to India, Blake said there are significant new sales on the horizon, up to $18 billion worth of contracts, for which American companies are competing.
Calling India as a rising global power, soon to be the world's most populous country, with a trillion dollar-plus e
conomy, Blake said it is a model of a tolerant pluralistic society in the region. "And it is a country increasingly comfortable with working with the United States," Blake said.
In July last year, Secretary of State Hillary Clinton visited India and launched a Strategic Dialogue which called for increased collaboration in a number of areas that fall under five pillars: strategic cooperation; energy and climate change; education and development; economics, trade and agriculture; and science, technology, health and innovation.
In November, President Barack Obama hosted Prime Minister Manmohan Singh for the first state visit of his Presidency, calling India an "indispensable" nation.
President Obama has also pledged to visit India in 2010, further underscoring the importance of India to the United States, he said. The State Department official said the strength of India's economy makes it the powerhouse of South and Central Asian regional growth.
"The Indian economy has been one of the fastest growing economies in the world since 2003, averaging 8 to 9 per cent growth in recent years... India's economy grew about 5.6 per cent in 2009, and is expected to grow 7.7 per cent this year. If India can sustain its economic reforms, it has the potential to sustain close to double digit growth rates for many years to come," Blake said.
One sign of India's prospering internal market is its growing middle class which now numbers about 300 million and is expected to double over the next 20 years to reach 600 million. To put that into perspective, that's roughly the size of the total population of the European Union right now, he noted.
As part of the US-India Strategic Dialogue, the US government is working with India to expand business opportunities, he said, adding the economics, trade, and agriculture pillar of the Dialogue is particularly important for business.
"Our trade has doubled just in the last five years. US exports to India were more than $28 billion in 2008. We expect that growth to continue into the foreseeable future as India's middle class continues to grow and as India's economy continues to open up. US investment also has grown very quickly, and now totals more than $16 billion," he said.
"The strategic cooperation pillar also is expected to offer numerous business opportunities. Last year, our two governments agreed on an end-use monitoring arrangement that will help the process of technology transfer between our two countries, and I think there's scope for further progress in that area," Blake said.
conomy, Blake said it is a model of a tolerant pluralistic society in the region. "And it is a country increasingly comfortable with working with the United States," Blake said.
In July last year, Secretary of State Hillary Clinton visited India and launched a Strategic Dialogue which called for increased collaboration in a number of areas that fall under five pillars: strategic cooperation; energy and climate change; education and development; economics, trade and agriculture; and science, technology, health and innovation.
In November, President Barack Obama hosted Prime Minister Manmohan Singh for the first state visit of his Presidency, calling India an "indispensable" nation.
President Obama has also pledged to visit India in 2010, further underscoring the importance of India to the United States, he said. The State Department official said the strength of India's economy makes it the powerhouse of South and Central Asian regional growth.
"The Indian economy has been one of the fastest growing economies in the world since 2003, averaging 8 to 9 per cent growth in recent years... India's economy grew about 5.6 per cent in 2009, and is expected to grow 7.7 per cent this year. If India can sustain its economic reforms, it has the potential to sustain close to double digit growth rates for many years to come," Blake said.
One sign of India's prospering internal market is its growing middle class which now numbers about 300 million and is expected to double over the next 20 years to reach 600 million. To put that into perspective, that's roughly the size of the total population of the European Union right now, he noted.
As part of the US-India Strategic Dialogue, the US government is working with India to expand business opportunities, he said, adding the economics, trade, and agriculture pillar of the Dialogue is particularly important for business.
"Our trade has doubled just in the last five years. US exports to India were more than $28 billion in 2008. We expect that growth to continue into the foreseeable future as India's middle class continues to grow and as India's economy continues to open up. US investment also has grown very quickly, and now totals more than $16 billion," he said.
"The strategic cooperation pillar also is expected to offer numerous business opportunities. Last year, our two governments agreed on an end-use monitoring arrangement that will help the process of technology transfer between our two countries, and I think there's scope for further progress in that area," Blake said.
The U.S. has made billions of dollars in weapons deals with India, which is in the midst of a five-year, $50 billion push to modernize its military.
At the same time, American military aid to Pakistan stands to nearly double next year, allowing Islamabad to acquire more U.S.-made helicopters, night-vision goggles and other military equipment. The aid has made it easier for Pakistan to ramp up its fight against militants on the Afghan border, as the U.S. tries to convince Islamabad that its biggest security threat is within the country, not in India.
During a late January trip to Islamabad, Defense Secretary Robert Gates said the U.S. would for the first time give Pakistan a dozen surveillance drones, a longstanding Pakistani request.
But India and Pakistan have each been irked when the U.S. made big-ticket weapons sales or transfers to the other. India lobbied against recent U.S. legislation giving Pakistan billions of dollars in new nonmilitary aid; the measure passed. A top Pakistani diplomat warned last week that a two-year-old civilian nuclear deal between the U.S. and India could threaten Pakistan's national security by making it easier for India to covertly build more nuclear weapons.
Washington's relationships with the two nations are very different. India, which is wealthier and larger than its neighbor, pays for weapons purchases with its own funds. Pakistan, by contrast, uses American grants to fund most of its arms purchases. A new U.S. counterinsurgency assistance fund for Pakistan is slated to increase from $700 million in fiscal year 2010 to $1.2 billion in fiscal year 2011.
"We do straight commercial deals with India, while Pakistan effectively uses the money we give them to buy our equipment," said a U.S. official who works with the two countries. "But we think that's ultimately in our national interest because it makes the Pakistanis more capable of dealing with their homegrown terrorists."
India is one of the largest buyers of foreign-made munitions, with a long shopping list which includes warships, fighter jets, tanks and other weapons. Its defense budget is $30 billion for the fiscal year ending March 31, a 70% increase from five years ago. The country is preparing its military to deal with multiple potential threats, including conflict with Pakistan. Tensions have recently flared between India and China over territorial claims along their border. China defeated India in a short war in 1962.
"For 2010 and 2011, India could well be the most important market in the world for defense contractors looking to make foreign military sales," said Tom Captain, the vice chairman of Deloitte LLP's aerospace and defense practice.
Russia has been India's main source of military hardware for decades, supplying about 70% of equipment now in use. Moscow is working to keep that position, with talks ongoing to sell India 29 MiG-29K carrier-borne jet fighters, according to an Indian Defense Ministry spokesman.
The Obama administration is trying to persuade New Delhi to buy American jet fighters instead, a shift White House officials say would lead to closer military and political relations between India and the U.S. It would also be a bonanza for U.S. defense contractors, and has dispatched senior officials such as Mr. Gates to New Delhi to deliver the message that Washington hopes India will choose American defense firms for major purchases in the years ahead.
Shortly after a late January visit by Mr. Gates—on the same tour that took him to Islamabad—In late January, the administration signed off on India's request to purchase 145 U.S.-made howitzers, a $647 million deal.Pentagon spokesman Geoff Morrell said Mr. Gates's visit didn't affect the substance or timing of the howitzer purchase.
That came days after India formally expressed its intent to purchase 10 cargo transport aircraft from