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Arms Industry Awaits New Orders From India - India Real Time - WSJ
Arms makers in the U.S., France, Russia and elsewhere will be waiting to see if India’s new government can make quick calls on tens of billions of dollars of pending defense purchases and move forward with the country’s plans to modernize its armed forces.
While the new ruling party, the Bharatiya Janata Party, has pledged to continue to upgrade the country’s military capabilities, it has also promised to fight corruption. It will have to be careful if it plans to go on a military shopping spree as some of the previous administration’s military deals have led to corruption allegations.
“The big, big question is whether a Modi-run government can incentivize the defense ministry and the public defense contractors to become more efficient and actually supply the equipment the armed forces want,” said James Hardy, Asia-Pacific editor at IHS Jane’s Defence Weekly. “It’s a gigantic task but the early suggestions are that by announcing their intention to include private industry and streamlining defense procurement procedures, the BJP should make progress.”
The BJP’s Narendra Modi will be sworn in as India’s Prime Minister on Monday. His cabinet, including the defense minister, is expected to take oath on the same day.
Companies in India and overseas will be looking at how much local production of military equipment the new government will expect. In a move to boost local capabilities as well as foreign investment in the sector, India may increase its ceiling on foreign ownership in defense firms from the current 26%.
“The need of the hour is a 25-year vision for the armed forces – spelling out India’s role in the global world order and cascading it down to conventional and non-conventional capabilities, on land, sea, air and outer space,” said Amber Dubey, head of aerospace and defense practice in India at KPMG.
In its manifesto ahead of the national elections, the BJP said that it would modernize armed forces and increase spending on research and development “with a goal of developing indigenous defense technologies and fast tracking of defense purchases.”
One of the tasks for the new administration in its first year in office will be to decide on a potential order for 126 Rafale fighter jets from France’s Dassault Aviation S.A. estimated to cost at least $10 billion.
India—the world’s largest importer of weapons–is also expected to decide on the purchase of 15 Chinook heavy-lift helicopters and 22 Apache attack helicopters from Boeing Co.
India has in recent years ordered billions of dollars of military hardware from the U.S. and others to expand its capabilities and diversify from its traditional supplier, Russia.
“The first test for Mr. Modi will be to see if he can expedite the straightforward deals that are sitting in the inbox – the (helicopter) deals with the U.S., for example,” said Mr. Hardy at IHS Jane’s. “After that, there’s a massive pile of more complex deals that need the new defense minister’s attention.”
The BJP won 282 of 545 seats in India’s lower house of Parliament, which analysts expect offers the new government the numerical muscle to sign on multi-billion dollar defense deals.
However analysts are worried that allegations of bribery surrounding key defense contracts in recent years will lead to stringent scrutiny which can potentially delay orders.
Some decisions have been delayed for years. Dassault, for example, was chosen as the preferred bidder for a fighter jet contract in January 2012, but an order has yet to be placed. New combat planes are crucial for the Indian Air Force which has started phasing out its Soviet-era MiG-21 fighters.
Military experts said the former defense minister A. K. Antony—in his efforts to avoid corruption—slowed the rate of arms procurement and this has affected the battle readiness of India.
Arms makers in the U.S., France, Russia and elsewhere will be waiting to see if India’s new government can make quick calls on tens of billions of dollars of pending defense purchases and move forward with the country’s plans to modernize its armed forces.
While the new ruling party, the Bharatiya Janata Party, has pledged to continue to upgrade the country’s military capabilities, it has also promised to fight corruption. It will have to be careful if it plans to go on a military shopping spree as some of the previous administration’s military deals have led to corruption allegations.
“The big, big question is whether a Modi-run government can incentivize the defense ministry and the public defense contractors to become more efficient and actually supply the equipment the armed forces want,” said James Hardy, Asia-Pacific editor at IHS Jane’s Defence Weekly. “It’s a gigantic task but the early suggestions are that by announcing their intention to include private industry and streamlining defense procurement procedures, the BJP should make progress.”
The BJP’s Narendra Modi will be sworn in as India’s Prime Minister on Monday. His cabinet, including the defense minister, is expected to take oath on the same day.
Companies in India and overseas will be looking at how much local production of military equipment the new government will expect. In a move to boost local capabilities as well as foreign investment in the sector, India may increase its ceiling on foreign ownership in defense firms from the current 26%.
“The need of the hour is a 25-year vision for the armed forces – spelling out India’s role in the global world order and cascading it down to conventional and non-conventional capabilities, on land, sea, air and outer space,” said Amber Dubey, head of aerospace and defense practice in India at KPMG.
In its manifesto ahead of the national elections, the BJP said that it would modernize armed forces and increase spending on research and development “with a goal of developing indigenous defense technologies and fast tracking of defense purchases.”
One of the tasks for the new administration in its first year in office will be to decide on a potential order for 126 Rafale fighter jets from France’s Dassault Aviation S.A. estimated to cost at least $10 billion.
India—the world’s largest importer of weapons–is also expected to decide on the purchase of 15 Chinook heavy-lift helicopters and 22 Apache attack helicopters from Boeing Co.
India has in recent years ordered billions of dollars of military hardware from the U.S. and others to expand its capabilities and diversify from its traditional supplier, Russia.
“The first test for Mr. Modi will be to see if he can expedite the straightforward deals that are sitting in the inbox – the (helicopter) deals with the U.S., for example,” said Mr. Hardy at IHS Jane’s. “After that, there’s a massive pile of more complex deals that need the new defense minister’s attention.”
The BJP won 282 of 545 seats in India’s lower house of Parliament, which analysts expect offers the new government the numerical muscle to sign on multi-billion dollar defense deals.
However analysts are worried that allegations of bribery surrounding key defense contracts in recent years will lead to stringent scrutiny which can potentially delay orders.
Some decisions have been delayed for years. Dassault, for example, was chosen as the preferred bidder for a fighter jet contract in January 2012, but an order has yet to be placed. New combat planes are crucial for the Indian Air Force which has started phasing out its Soviet-era MiG-21 fighters.
Military experts said the former defense minister A. K. Antony—in his efforts to avoid corruption—slowed the rate of arms procurement and this has affected the battle readiness of India.
