Prime Minister Narendra Modi’s personal diplomacy has been compared to the ‘bear-hug diplomacy’ of former US President Bill Clinton. Modi’s personal touch has been credited with helping to improve relations between India and global powers, but it has also been criticised by some as being too informal and lacking in substance. Foreign leaders seem to like PM Modi because his visits bring in huge defence and technology sales. It is like a rich uncle visiting and leaving behind gifts. So, Western leaders have learnt to reciprocate with their own personal touches.
The Tata Group’s Air India has placed a significant order for 220 Boeing jets, valued at about $34 billion. The order includes 10 wide-body B777X planes, 20 wide-body B787 planes and 190 narrow-body B737MAX planes. The purchase of an additional 20 B787s and 50 B737MAXs is also an option. Additionally, Air India has ordered 34 A350-1000s and six A350-900s from Airbus, along with 140 Airbus A320neo and 70 Airbus A321neo planes, totalling $36 billion. These contracts ensure a steady stream of business for Boeing and Airbus for at least the next 40 years.
Indigo, a prominent private sector company holding a significant share of the Indian air travel market (over 30%), has placed the largest order in history with Airbus, consisting of 500 single-aisle A320s. This massive order amounts to a staggering $50 billion investment by Indigo.
In addition to a previous substantial order, Indigo is still awaiting the delivery of 480 Airbus planes. These deals have been defended by Civil Aviation Minister Jyotiraditya Scindia, who stated that it is important for “India’s Flag to be represented in the international arena”. The minister seems to be unaware that the majority of the aircraft ordered by Air India and Indigo will be primarily used for domestic flights within India. Therefore, if he wants the Indian Flag to be displayed prominently in international space, he will need to explore other avenues or strategies.
Large Purchases, Limited Gains
The Indian government, politicians, industry leaders and bureaucracy often focus on the wrong aspects and fail to see the bigger picture. They seem to have limited vision and struggle to think beyond immediate circumstances.
For the past 30 years, there has been a suggestion to follow China’s approach while acquiring high-value passenger aircraft deals. This strategy would not only involve obtaining aviation technologies, but also acquiring manufacturing equipment, CAD/CAM systems and expertise in such production skills as process engineering. Instead of periodically spending billions of dollars and relying on aircraft vendors for small benefits, the suggestion has been to invest in developing capabilities for producing complete passenger aircraft. Currently, New Delhi appears content with limited gains from large purchases made abroad, such as setting up a maintenance, repair, and operations (MRO) unit in Hyderabad and securing promises of offloading minor aircraft components (such as door assemblies) from Tata factories in India.
How China Plays Its Cards Right
Unlike China, the Indian government has failed to grasp the fundamental principles of negotiation, which involve securing significant benefits when making large purchases. China, on the other hand, has instinctively pursued substantial deals right from the beginning. After 10 years of negotiations, China—known for its strategic approach—successfully secured a co-production deal with California-based McDonnell Douglas Aircraft Company in 1985. The deal involved the production of 26 medium-haul MD-80 passenger aircraft, amounting to approximately $800 million.
Out of the total order, 25 aircraft were planned to be assembled in China by the Shanghai Aviation Corporation (SAC), while only one aircraft would be purchased directly. As a condition of the deal, American engineers and technicians were required to be present on the SAC factory floor, providing training and expertise to Chinese project managers and workers. This allowed the Chinese workforce to gain practical knowledge and skills from experienced professionals while working on the project.
The contract included provisions for the Chinese company to potentially acquire the entire MD-80 production line and resources if there was a need for expanded domestic air travel. Following the transaction, McConnell Douglas eventually sold its entire passenger aircraft business to China. As a result, China now manufactures its own modern, single-aisle passenger aircraft known as the Comac C919. These aircraft are utilised by numerous domestic airlines in China.
Splurging Money Abroad
India has allocated substantial funds to procure aircraft from the US and France, seemingly without any hesitation about the expenditure. These investments aim to create job opportunities and support the aerospace industries in those countries. However, there is a lack of questioning over whether Indian private sector airlines should be permitted to enter such deals using the country’s foreign reserves, which do not contribute to India’s indigenous aircraft technology and manufacturing capabilities.
During Prime Minister Modi’s visit to the White House, US President Biden was attentive and friendly, highlighting the significance of Boeing’s Indian order leading to a million more jobs in America. The US President also approved a significant sale in the military aviation field, including the transfer of 80% of GE 414 jet aircraft engine technologies to strengthen India’s security and align it with America’s national interests.
Challenges with Technology Transfer and iCET Framework
Despite the positive cooperation between the US and India through the Initiative for Critical & Emerging Technologies (iCET), 20% of the technology in the GE 414 jet engine remains non-transferrable. This portion includes critical technologies related to nuclear weapons or missile technology, and the US government is unlikely to transfer them, even under the iCET framework. It’s important to note that iCET does not supersede the US government’s export control regulations.
India is presented with two options for GE jet engines: the Base model 414 and the new Enhanced Durability Engine (EDE) variant. The EDE engine offers higher thrust but has a shorter engine life compared to the Base 414 model. India’s choice will depend on its specific needs, considering factors like thrust requirements and engine longevity.
The EDE engine’s augmented thrust closely aligns with the requirements set by Indian designers for aircraft such as the Advanced Medium Combat Aircraft and the two-engine Tejas for aircraft carrier operations. This thrust improvement is achieved by incorporating a second low-pressure turbine made from ceramic composites, making the engine more durable and efficient.
French Deal as an Attractive Alternative
France quickly responded to the promise of the GE 414 engine from the US and offered to assist India in designing and manufacturing a brand new engine with a thrust of 110 kN through Safran (formerly known as SNECMA). The French government aims to establish a centre of excellence in India for this purpose, with the engine projected to be completed within 10 years. Unlike the US deal, the Safran deal provides India with greater control, as France is not subject to the same export control laws.
French ambassador Emmanuel Lenain emphasised the importance of sustainability and autonomy in India’s foreign defence contracts. Sustainability ensures India’s defence industry can maintain and upgrade its equipment, while autonomy grants India more control over its defence and security by producing its own defence equipment.
One appealing aspect of the Safran proposal is that it will introduce a completely new design, potentially incorporating advanced materials like ceramic composites. This design will be compatible with the stealth features envisioned for AMCA/Tejas aircraft. Additionally, the project will include a complete supply chain and a plan to produce all necessary components in India.
Safran is currently developing a jet engine for France’s sixth-generation fighter aircraft, which has an afterburner thrust of 125 kN. This demonstrates their expertise in engine design and production, making them capable of assisting India in meeting its military specifications for a 110 kN engine. Paris is providing an important portion of crucial technology (20%) that was not part of Washington’s GE 414 technology transfer agreement. This technology includes single-crystal turbine blades for the jet engine and other important technology.
The All-Powerful US Congress
Defence contracts with US companies or government-to-government deals are not legally binding. The US Congress has the power to cancel any such defence contract at any time even if it has been signed, as it can control government spending and defence contracts are a form of government spending. India has experienced this in the past, and it has led to significant losses for the country.
India once had a deal with the US for the supply of low-enriched fuel for the lifetime of the light water reactors at the Tarapur nuclear power station. However, the US Congress passed new non-proliferation laws that required the US to cancel the deal. This caused India to lose out on a valuable source of fuel for its nuclear power plants. President Ronald Reagan was compelled to rescind the deal because of these laws. The Reagan Administration was worried that, if India lost trust in the US, it would damage their relationship. So, they convinced France to provide fuel to India instead. A different US Administration with different priorities could have just as easily ignored India’s concerns and said they were unable to do anything because they had to follow US law. The US Congress could also cancel the GE 414 contract at any time, just as they did with the nuclear fuel deal in the past.
During the 1980s, the government led by Benazir Bhutto paid around $370 million for more F-16 strike aircraft. However, due to new legislation in the US, the contract was invalidated, resulting in the aircraft remaining undelivered and parked in a Nevada base for many years. The money paid by Islamabad was not returned until 30 years later, when its value had decreased significantly due to inflation.
If the White House or the US Congress wants to punish someone, they can do so without considering other parties involved. After India’s nuclear tests in 1998, President Bill Clinton imposed sanctions on India. As a result, the Indian Navy’s Sea King anti-submarine warfare helicopter fleet was grounded because it had components made in the US.
This uncertainty surrounding the use of US-made military equipment in India is a concern highlighted by ambassador Lenain. The Modi government should consider these facts. If the US Congress decides to punish India following the GE 414 deal, for instance, if India does not support a specific US policy, the significant investment made by India in purchasing the GE 414 engine and acquiring its technology would hold no value.
The Dark Side of the Safran Deal
In case of the Safran deal, however, there is an important issue to consider. The Bengaluru-based Gas Turbine Research Establishment (GTRE) had an agreement with Safran/SNECMA for consultancy services to support the development of the Kaveri engine. However, according to Indian sources, when the situation became critical, Safran refused to provide substantial assistance or support. It delayed the development of the Kaveri engine for a long time. However, when Prime Minister Modi decided to buy Rafale planes with Safran M-88 engines in 2015, it made the Kaveri engine’s success or failure irrelevant.
To ensure that France and Safran do not take advantage of India again, the contract signed by the Indian government needs to be meticulously drafted by the Ministry of Defence (MoD). It should include detailed technical specifications of every technology—from small components to major assemblies, including such critical technologies as single-crystal turbine blades. The contract should have a strict timetable for technology transfer, specifying when and to which Indian agency each technology will be transferred.
Flexibility should not be allowed that could enable Safran to evade its contractual commitments. Each clause of the Transfer of Technology (ToT) agreement, potentially spanning thousands of pages, must be legally enforceable under international law, with severe financial penalties imposed if Safran fails to comply with any ToT clause or causes delays in the engine project’s timeline and budget.
Notably, no government agency in India has the necessary expertise in contract writing. This is a matter of concern for Prime Minister Modi, Defence Minister Rajnath Singh, and the country as a whole. The lack of technical knowledge, legal understanding, and drafting skills in the Ministry of Defence and the entire Indian government has led to costly defence technology transfer deals in the past. This issue needs serious attention. The government will need to find experts in contract writing from somewhere to avoid being taken advantage of again and ending up with unfavourable agreements that harm India’s reputation.
There is a pressing need for a government agency that oversees and supervises all contracts between any ministry or department of the Indian government and foreign vendors or companies, especially those involving expenditure of hard currency. The Pentagon, for instance, has a training institution that educates military officials in the intricacies of drafting country- and interest-specific contracts, as well as methods for monitoring the delivery of contracted items. When inexperienced officials from India’s MoD negotiate technology transfer deals with professionally trained counterparts from the US or France, it is not hard to guess which side will have the advantage.
Political and Strategic Factors
When India decides which aero-engine offer to accept, there are broader political and strategic factors involving India, the US, and France that will come into play. These considerations include the interests and objectives of all three parties. After four decades, the US government has recognised that India will not consider buying American military equipment unless advanced technology is transferred as well. However, the US is still reluctant to share certain high-tech components, as seen in the GE 414 jet engine deal where they excluded key technologies.
The Biden Administration sees this as an opportunity to strengthen ties with India, given Prime Minister Modi’s friendliness towards the US. Many Indian experts believe that, despite its limitations, such a deal would establish mutual trust and grant access to more advanced American technologies, thereby balancing India’s security against a technologically superior China. However, these experts may not be aware that even NATO allies receive downgraded US equipment, so India should not expect preferential treatment beyond what NATO member-states receive.
A closer military supply relationship with the US is expected to strengthen overall bilateral ties and bring additional benefits to India. These benefits may include increased US investments in the Indian economy, infrastructure development, trade preferences, and potential opportunities in the semiconductor design and production industry. Additionally, as the AUKUS alliance faces challenges and the military aspects of the India-US-Japan-Australia Quadrilateral are slow to progress due to India’s cautious approach, the prospects of containing China’s influence in the Indo-Pacific region appear uncertain.
Washington believes that substantial cooperation, particularly in such areas as space and semiconductors, beyond just the GE 414 deal, will provide the US with a valuable tool to shape Indian foreign and security policies. They see it as a way to exert influence similar to how Moscow used its arms pipeline to shape Indian actions during the Cold War.
France, on its part, is eager for India to invest in the French defence industry for two main reasons. First, it would enable France to maintain its strategic significance in the Indo-Pacific region. And second, it is hoped that stronger military ties between the two countries could result in increased utilisation of Indian military bases in Djibouti and French territories in the Indian Ocean, specifically St Pierre on Reunion Island. This would help France reduce the financial burden of maintaining a military presence in the areas located to the east of the Suez Canal.
The ITAR Red Flag on Deals
France possesses advanced technology and well-designed weapons systems that are highly valued by the Indian armed forces. Prime Minister Modi should prioritise acquiring such technology from President Emmanuel Macron. Furthermore, French-sourced armaments offer greater sustainability and autonomy, reducing concerns in these areas. While such aircraft as the C-17s, C-130s, and P-8I armed maritime reconnaissance aircraft have not faced significant issues with servicing and spare parts support, frontline fighter aircraft pose different challenges. Additionally, India requires assurance that the military equipment it purchases will not be subjected to International Traffic in Arms Regulations (ITAR) restrictions, a guarantee that no US administration can provide. This presents an insurmountable problem.
The phrase, ‘ITAR restrictions, a guarantee that no US Administration can provide’, refers to the fact that the US government cannot guarantee that military goods purchased by India will be ITAR-exempt. The ITAR set of US rules control the import and export of defence items and services. These regulations are implemented and enforced by the US State Department, and compliance with ITAR is a legal requirement for companies and individuals involved in the defence industry.
Since ITAR is subject to change and interpretation by the US government, no Administration can provide an absolute guarantee that Indian military purchases will be exempt from these restrictions. This may pose a challenge for India in terms of obtaining certain advanced technologies and weapons systems from the US as it could potentially lead to limitations on the transfer of sensitive technologies or stringent restrictions on their use or sharing.
Circumspect Approach Needed
A truly nationalist Indian government would adopt a different approach. Instead of the limited choices, the current government is facing, Modi should consider the benefits of India’s neutral position on the Ukraine conflict. This stance has elevated India’s political status, strengthened its relationships with the US, the West, and Russia, and garnered attention from major countries seeking its partnership. It is advisable not to commit to any particular technology or alliance hastily. The acquisition of the S-400 air defence system, as well as the contract for purchasing and producing Grigoryvich-class stealth frigates at the Goa shipyard, has reaffirmed India’s relationship with Moscow, which remains strong.
Hopefully, Modi will take full advantage of India’s privileged position to make strategic decisions regarding the adoption of US and French technologies. By carefully selecting technologies and considering their direct and indirect industrial benefits, India can address its technological shortcomings and enhance its existing capabilities. This will contribute to the country’s progress towards achieving Aatmanirbharta. It is important to avoid costly deals for entire systems as they are wasteful and do not make economic or national security sense.
Purchasing Specific Technologies
Instead of pursuing costly deals for complete submarine systems, India should focus on acquiring specific technologies from different countries. For instance, India could express interest in the Barracuda submarine design from France and leverage competition between French company DCNS and German company ThyssenKrupp Marine, which offers the HDW 214 submarine. India should also seek advanced technologies, such as the optronic mast, from leading US company L3Harris, by requesting President Biden’s assistance in removing technology restrictions.
Overcoming Military Resistance
The proposed approach of purchasing individual technology components and integrating them with domestic design and development processes may face opposition from the military services. They will likely present numerous arguments against this approach, claiming it poses risks and leads to unreliable weapons systems. They may advocate purchasing complete submarines, aircraft, and other systems in the interests of national security.
However, this mindset has resulted in India becoming heavily dependent on foreign technology and arms over the past 60 years. The main issue lies in the military’s lack of trust in indigenous technology and fully homegrown weapons systems. To overcome this resistance, a straightforward solution would be to replace the top military leadership who are unwilling to embrace this new procurement method. This will send a clear message to the remaining ranks to align with the new approach.
One hopes that the Modi government will demonstrate courage and intelligence, prioritising self-reliance while taking the right decisions. This may involve challenging the prevailing import-focused mindset of the short-sighted Indian policy establishment and military. Achieving self-reliance comes with its own costs, but the nation is ready to bear them. It requires Indian leaders to translate their words into actions and rapidly implement self-reliance, rather than merely speaking about it.
Leveraging Economic Reforms
India’s rejection of the 414 deal and its decision not to purchase from Macron’s offerings in bulk will not harm the US fab/semiconductor deal. However, if the Modi government focuses on enhancing the economy by swiftly resolving issues related to land acquisition and labour laws, it can attract foreign direct investment and encourage Western and Asian companies to relocate their manufacturing units from China to India. Such reforms would break China’s stranglehold on the global supply chain and potentially earn Modi international appreciation.
India should clearly communicate to the US and France that it intends to change its procurement strategy regarding arms. Instead of purchasing complete weapons systems, India should aim to acquire specific technologies. It is important for the US and France to embrace this new approach promptly in order to enhance their chances of selling the desired technologies to India. India has previously achieved success with this approach, known as the ‘technology mission mode’, in areas such as space systems, missiles, and nuclear weapons, where it faced difficulties in obtaining foreign technologies. This success serves as evidence that the same approach can be equally effective for conventional military systems.
–The author of this article is a Defence, Aerospace & Political analyst.