When the two nations signed the first formal Defence Agreement in 2005, much progress was made. However, both sides still need to work through roadblocks that plague India’s acquisition of U.S. defence technology: concerns over the U.S. as a reliable supplier, the United States’ adversity to releasing certain technology, and worry over the transferability of specifications to less-trusted, third end-users. In addition, three agreements Gates pushed India to sign during his visit didn’t happen. The Logistics Support Agreement (LSA), the Communication Interoperability and Security Memorandum of Agreement (CISMOA), and the Geospatial Agreement are each required under U.S. domestic laws in order to transfer sensitive defence technology.

The signing of the End-User Monitoring Agreement last year was a landmark achievement for India-U.S. relations. However, during Secretary Gates’ visit, India’s Defence Minister Shri Antony conveyed some of India’s lingering concerns, such as the United States’ denial of export licenses for various defence-related requirements of the Armed Forces, and its continuing inclusion of some Indian Defence Public Sector Undertakings (PSUs) and Defence Research and Development Organisation labs on the U.S. government’s Entity list (a list of parties whose presence in a transaction can trigger a license requirement under the Export Administration Regulations). While such restrictions are anomalous in the current context, President Obama’s on-going, comprehensive reform of U.S. export control regulations could help facilitate the supply of defence technology and equipment to India.

Defence acquisition is a complex matter and one on which India will keep its options open. Increasing requirements to fulfil India’s power needs beyond its borders suggests that the U.S. will remain a preferred partner. It is certain that future weaponry, especially for the Air Force and Navy, will increasingly rely on unmanned vehicles and greater use of laser technology, an area where the U.S. is the world leader. The scenario of contending with two adversaries at the same time has already been painted by the Army Chief. A significant increase in the four-fold difference between Chinese and Indian military prowess can be expected, coupled with the intensification of China’s nuclear and missile nexus with Pakistan. The expected completion of Chinese base facilities at Sittwe (Burma), Hambantota (Sri Lanka), and Gwadar (Pakistan) will affect the military balance on the seas and in space. India will have to cope with this dangerously-evolving scenario.

India has reiterated that defence trade relations must move from a purely buyer-seller relationship to a more comprehensive relationship covering the transfer of technology and co-production. Reports indicate that 15 per cent of Indian military equipment is state-of-the-art, 35 per cent mature, and 50 per cent obsolete. India currently procures approximately 70 per cent of its equipment needs from abroad, but aims to reverse this balance to manufacture 70 per cent or more of its defence equipment at home. This is a major opportunity to build an industrial infrastructure that will be able to quantitatively, technologically, and qualitatively support the requirements of India’s Armed Forces in terms of weapons, systems, platforms, upgradation, and overhaul.

For this to happen, the share of India’s private sector will need to increase far beyond the 14 per cent at present (with foreign sources taking 70 per cent and the remainder going to Defence PSUs and the Indian Ordnance Factories, and only $14 million in foreign direct investment, even with 100 per cent entry permitted). Unless the foreign direct investment cap increases substantially, the resulting exclusion of India’s resurgent private sector will be detrimental to its national security needs.

By 2022, India is expected to purchase $100 billion worth of military equipment and another $9.7 billion to be spent by 2016 on homeland security. India must capitalise on this opportunity by leapfrogging its technology sector to a higher level. Russia still provides 80 per cent of India’s military hardware but in the last three years, India purchased over $3 billion worth of U.S. military equipment and is moving toward completing the largest defence transaction yet (about $2.5 billion), with the purchase of 10 strategic lift aircrafts.

Does increasing the purchase of defence equipment lead to a more solid India-U.S. alliance? There remains a gap between how India and the U.S. view and understand their strategic partnership. There are many ways to cut the ‘strategic cake:’ by time, by space, by criteria, and by issues. There is a pressing need for both sides to bring greater clarity to the discussion to further strengthen this relationship.

This piece was first published here by The Asia Foundation.

Rajendra Abhyankar, former Indian Ambassador, is currently an Advisor with The Asia Foundation in India.