INDO-US Defence Industry Co-operation: Problems and Prospects

The Indian Defence Industry in the past has been public sector dominated and exclusively controlled by Government of India. But this scenario is changing since 1991, with New Economic Policy of Liberalisation, Privatisation and Globalisation (1991) has been bringing major changes in Indian Defence Industry. The private sector participation is increasing gradually in this sector. In 2001 the country opened up defence sector for 26% FDI and100 per cent for Indian private sector investments in select areas. In recent budget FDI limit is raised to 49%. It denotes the paradigm shift in defence public sector industries where state is reducing its investments and encouraging private and portfolio investments. Recent Modi-Obama initiatives have reenergized defence sector. Defence modernization is priority of the present Indian government and US can certainly help in this direction. India and the U.S.A. agreed to extend the Defence Cooperation Agreement in January 2015 and identified four projects under the Defence Technology Trade Initiative (DTTI) for joint production and development and exploring cooperation for jet engines and aircraft carrier systems. The US has been hard-selling a score of "transformative defence technologies" for co-development and coproduction with India under the DTTI. There are various obstacles in Indo-US defence industry cooperation and it needs to be analyzed in spite of policy changes which call for politico-techno-economic facilitation in true sense. India and US are having a strategic relationship for this sector. It is therefore expected that private sector industry from both the countries will force their respective governments to take realistic policies. This paper reviewed the problems and prospects involved in it.