Lockheed Martin appears to be following through with its intent to market F-16 fighter aircraft to emerging economies. Speaking at the Singapore Airshow on Thursday, a Lockheed executive announced that his company wanted to build the aircraft in India, a country whose low-cost manufacturing climate and engineering expertise lend themselves to such a project, its poor business environment notwithstanding.
But there are likely other factors that explain U.S. defense companies’ interest in India. Though the country is known as the world’s largest democracy, it is also the world’s largest importer of arms. In 2015, India imported $5.6 billion worth of arms, part of a $40 billion defense budget expected to increase over the next year. The country’s appetite for weapons technology is driven by the lofty ambitions of Prime Minister Narendra Modi. Over the next 11 years, Modi wants to invest $150 billion into modernizing India’s aging military hardware.
Of course, Modi isn’t interested in only importing this technology. As part of his “Make in India” campaign, he means to turn his country into a world-class weapons manufacturing hub. (Last year, India accounted for less than 1 percent of total global arms sales.) It is in support of this mission that Indian defense contracts often stipulate that a percentage of their defense purchase be built in India to employ what will become the world’s largest workforce by 2025.
U.S. defense companies’ interest in India is ostensibly good news for both Modi and the companies, but if past deals are any indication, it will take some time for anything to come of them. India is a notoriously exacting haggler. Take, for example, its ongoing negotiations with France. New Delhi was initially interested in buying 124 jets, but disagreements over pricing and other details prompted India to reduce its order to 36. It was believed that the French president’s visit to India in January would provide a final, forceful push to seal the deal, but both countries are still hammering out the details.
India can afford to negotiate the best possible offer because the arms market is currently a buyer’s market. During the Cold War, Moscow and Washington were the world’s dominant arms suppliers. But that system has since collapsed. In its place stands a dynamic industry, with manufacturers in Israel, Japan and South Korea all competing to sell their planes, missiles and tanks to countries like India. Accordingly, India has the freedom to court as many suppliers as it can — good news for a country that has traditionally relied on Russia for its defense needs.
Of course, any discussion of India’s defense industry should also mention Pakistan, India’s regional rival and (as of 2014) itself one of the world’s largest arms importers. The two countries have fought three wars since achieving independence in 1947, with a fourth barely averted in 2002.
Less than a week ago, the Obama administration approved a deal for the sale of up to eight F-16 fighters to Pakistan. India expressed disappointment at the deal, and U.S. officials expressed their reservations, too. Sen. Bob Corker, who chairs the Senate Foreign Relations Committee, wrote that he did not want U.S. taxpayers to help pay for Pakistan’s jets, especially since Islamabad is believed to coordinate with the very extremists equipment like the F-16 is meant to fight.
– Stratfor report