Though part of the overall July 18 Agreement, the Defence Framework (DF) signed earlier in April 2005 between India and the US is a different ballgame. Unlike the July 18 Agreement and especially the civilian nuclear energy deal that was sudden and is controversial, defence relations have matured gradually culminating in the DF. While mutually beneficial, the DF, among other things already being done, focuses on two new issues: defence procurement and production, and the signing of the Maritime Cooperation agreement, both of which are vital for India.
The defence procurement and production group formed under the rubric of the Defence Policy Group (DPG) to be chaired by the defence secretary, Shekhar Dutt, deals with all aspects of technology transfer, joint and co-production of weapon platforms with global defence manufacturers. This became possible because of three steps taken by the government: One, 100 per cent opening of the Indian defence sector to Indian private sector. This is far from perfect for many reasons and does not still allow a level laying field to the private industry. But, at least, things are moving in the right direction and good results would follow.
Two, permitting 26 per cent Foreign Direct Investment in the defence sector. The US hopes that in coming years, India may agree to as much as 51 per cent FDI in defence sector. And three, the policy of direct offsets for global arms manufacturers in the Indian defence sector. What this means is that global arms manufacturers would have a direct life long stake in what they sell to India. They would involve the Indian defence industry, both public and private, in manufacturing systems and sub-systems of weapon platforms being sold to India. On the one hand, given the low labour costs and an advanced information technology industry in India, the foreign arms companies would get commercially viable returns. On the other hand, the Indian industry will imbibe superior technology and also create more jobs. This is a win-win situation. Starting with direct offsets, the two industries would gradually move towards joint production and eventually co-production in decades ahead. Probably, the biggest advantage from the industry-to-industry relationship has not been appreciated as yet.
Should India decide to conduct nuclear tests in the distant future, the US laws reneging all defence and other contacts with India would automatically come into force. However, given the fact that the US defence industry has a vital stake in the US dispensation, the push to ease pressure on India and to make suitable amendments in the US laws will come from within. Indeed a strengthened industry-to-industry relationship can help overcome vicissitudes of India’s relations with the US.
Meanwhile, the Maritime Cooperation agreement deals with cooperation between the two navies in the Indian Ocean Region (IOR). As a growing power with increased trade through the IOR, the Indian Navy has the responsibility to ensure uninterrupted sea-lanes of communications from the Persian Gulf till the Strait of Malacca. This involves many things including preventing piracy at sea, search and rescue, marine pollution, natural disasters and so on. It is only natural that the Indian Navy interacts with the US Navy, the most powerful navy in the IOR, for safety and stability in the region. The tone for increased defence and military cooperation was set by the US defence secretary, Donald Rumsfeld who reportedly said at the signing of the DF that, ‘the length and breath of the DF is not merely defence or selling equipment, but much more work on equal terms.’