Category — Defense/ Security

“American investors want to be part of the Indian growth story…” – CSIS

Richard M. Rossow, Senior Fellow at the Center for Strategic and International Studies, Washington DC, where he occupies the Wadhwani Chair in US-India Policy Studies, delivered a talk on ‘US-India Economic Ties: The Next Ten Years’ at the ICFAI University, Hyderabad.

According to him, with further simplification of investment policies that is expected from the new government, American investors would find India even more attractive as an investment destination. Three areas which are likely to see significant growth in US-India partnership are civil aviation, defense and insurance sectors, which were, incidentally, opened up for foreign direct investment recently.

Rossow pointed out that it is very rarely that the voices from Washington, whether they are policy hawks, investors or strategy experts, speak in one voice and it is happening now. The roll out of Goods and Service Tax, simplifying of labor laws and reforms in land acquisition policies are three significant developments that global investors are awaiting in India. Anything else that improves the ease of doing business in India would significantly advance the economic ties between the two nations.

Specifically, while India-watchers are aware of the challenges in moving key legislation through the Rajya Sabha, the upper house of parliament, at this point of time, the investor community at large still has placed great hopes on significant progress in the economic environment in India, he said. Any disappointment on that front could again slow down the deepening of economic ties between the two nations, he added.

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December 15, 2014   No Comments

U.S.-India Discuss Projects in Defense

Speaking at the Institute of Defense Studies and Analyses in New Delhi on December 3, Puneet Talwar, U.S. assistant secretary of state for political-military affairs said that the U.S. and India are discussing more than a dozen production and development projects in defense. Talwar headed an inter-agency delegation, which includes officials from the U.S. state department, the Pentagon and the U.S. Pacific Command, to co-chair a political-military dialogue with officials from foreign and defense ministries.

Talwar said in his speech, “To us, our defense relationship with India is not transactional; it is an investment in our future together. We want to move beyond a buyer-seller relationship, towards one of co-development and co-production, where both our nations will benefit.” Since 2008, bilateral defense trade has grown from near zero to $10 billion, Talwar affirmed.

The New York Times reported last month that India was the world’s largest buyer of weapons, accounting for 14% of global arms imports, nearly three times as many as China, and that the U.S. had surpassed Russia, the traditional military hardware source, as India’s biggest arms supplier. India had short-listed five of 17 hi-tech items of military hardware offered by the U.S., the Press Trust of India reported earlier this week. These include naval guns, mine-scattering anti-tank vehicles, unmanned aerial surveillance system, Javelin missiles, and aircraft landing system for carriers, the report said. One of the ways the U.S. is moving the defense relationship forward was by modernizing the American defense exports licensing system. Less than 1% of licenses destined for India are denied, a figure that is on par or better than many of the U.S.’s closest partners, noted Talwar.

In the Indo-Pacific region, both the U.S. and India have key and complementary interests, Talwar said, adding that both sides “share a vision where all parties pursue resolution of their territorial and maritime disputes through peaceful means, in accordance with universally recognized principles of international law, including the United Nations Convention on the Law of the Sea. Securing these sea lanes peacefully is crucial to ensuring that international commerce can continue to flow without disruption,” Talwar explained, almost mirroring India’s view on freedom of navigation.

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December 4, 2014   No Comments

New Defense Minister Acts Quickly

Six times since the infamous Bofors scandal of the 1980s, India has cancelled the purchase and upgrade of its artillery. This is set to change. At his very first opportunity to chair the Defense Acquisition Council meeting, Manohar Parrikar issued orders for a Request for Proposal to be launched for 814 mounted-gun systems. The guns will be bought under ‘buy and make’ category – the first 100 guns will be bought off the shelf from an original equipment manufacturer and the remaining 714 will be manufactured in India by an Indian company.

Indian companies are already working in tandem with their partners. Larsen & Toubro  has a tie-up with Nexter of France, Tata with Denel of South Africa while  Kalyani group has a tie-up with Elbit of Israel. The Russians are already working with the Ordnance Factory Board which is a unit of India’s Ministry of Defense.

The India Expert hopes that the seventh time is a charm for this acquisition program.

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November 22, 2014   No Comments

Rising Optimism for Doing Business in India

The environment for foreign investments in India started improving a short time before Narendra Modi was elected prime minister on a business-friendly reform agenda in May 2014. United Arab Emirates’ Etihad Airwas acquired a stake in India’s  largest corporate carrier, Jet Airways. As a result of this deal, the U.A.E. ranks in the top five of India’s leading foreign investment sources.

A survey conducted by Ernst & Young found that 53% of more than 500 business leaders around the world planned to enter or expand their operations in India within the following 12 months. The list of multinationals that are making long-term investments in India includes U.K. liquor company Diageo, which acquired majority ownership of United Breweries, once run by Indian billionaire Vijay Mallya; French energy company GDF SUEZ; pharmaceutical giant GlaxoSmithKline; Sweden’s IKEASingapore Airlines; Starbucks, which partnered with the Tata BeveragesUnilever, Vodafone and Volkswagen all upped the ante upon Modi’s eelection.

Over the last year, 67% of foreign direct investment in India has gone go the services sector, with 18% going to the manufacturing sector. The remaining 15% has gone to agribusiness investments, according to the Reserve Bank of India.

FDI in India is capped in a number of key sectors.  Foreign ownership cannot exceed 49% in Indian defense contractors, or 74% in private banking. Nandan Nelivigi, head of India’s practice at White & Case said, “Competition for the best opportunities [in India] is already fierce and will only intensify as the business climate improves. Fortunately, investing in India today is no longer a step into the dark.”

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November 17, 2014   No Comments

India Wants to Export Weapons

India’s Defense Research and Development Organization has identified 15 weapon systems that may have an export market,  the country’s top military scientist Avinash Chander said.

The military hardware shortlisted for export includes

  • Astra beyond-visual-range air-to-air missiles,
  • Prahar surface-to-surface missiles,
  • Akash missiles,
  • Light combat aircraft, Tejas,
  • supersonic cruise missile Brahmos,
  • Sonars,
  • Arjun MK-2 tanks,
  • Airborne early warning and control systems,
  • plus many  unmanned systems and battlefield radars.

“There is a significant potential for export. The DRDO is more challenged by lack of trust in its capabilities rather than lack of capability,” continued Chander, the man credited with shaping India’s strategic missile program. Home-built missiles would form the centerpiece of India’s arms exports, within the framework of the missile technology control regime that bans exporting missiles with ranges above 200 miles. However, some of these platforms such as the LCA and Arjun Mk-2 aren’t operational yet.

In August, the DRDO had come in for some sharp criticism from the new Prime Minister over delays and cost overruns in key programs. The DRDO chief said, “On an average, we are delivering products in a cycle of eight to ten years from project sanction, which is only two to three years behind global players. In many cases, we had to develop technology from scratch.” He said several projects had missed many deadlines due to technology denial regimes, extremely demanding qualitative requirements, and a shrinking talent pool.

 

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November 13, 2014   No Comments