India's military exports grew from US $17.4 million in 1999-2000 to US $47 million in 2002-2003.
In 1998 Indian defense production was opened to private companies wholly owned by Indians. The government then began allowing up to 26 percent direct foreign investment in defense manufacturers, permitting Indian companies with some foreign ownership to bid on defense contracts.
India is the second largest arms buyer in Asia after China.
India earmarked US $5.3 billion in an interim "Defense Modernization Fund" to modernize military equipment, according to a statement made by the Finance Minister Jaswant Singh in February, 2004.
Defense News reported on September 20, 2004 that Mazagon Dock Ltd.is close to signing a deal for the construction of six French-designed Scorpene submarines for an estimated $2 billion. Mazagon Dock is India's top state-owned military shipyard, which for decades has built destroyers, missile boats and submarines.
Foreign Military Relations
Aviation Week & Space Technology reported on October 4, 2004 that high-level US-India talks scheduled for mid-October will aim to establish mutually acceptable end-user verification processes for space and defense equipment. The second phase of the Next Steps in Strategic Partnership (NSSP) initiative will thus form a joint implementation group to address technology control issues. The NSSP is a framework for bilateral relations in civilian nuclear activities, civilian space programs and high technology trade.
Eight months after the Cope India exercise, the losing performance of U.S. fighter pilots (3rd Wing) in simulated air-to-air combat against the Indian air force continues to produce concern among some military circles. Aviation Week & Space Technology reported on October 4, 2004 that the exercise also shocked some in Congress and the Pentagon who used the event to renew the call for modernizing the U.S. fighter force with the F/A-22s and F-35 Joint Strike Fighters. When asked to explain what led to the poor American performance, Maj. Mark A. Snowden, the 3rd Wing's chief of air-to-air tactics, cited the widely claimed factor that none of the F-15Cs was equipped with the newest long-range, active electronically scanned array (AESA) radars. Snowden, interestingly, also stated that "the outcome of the exercise boils down to [the fact that] they ran tactics that were more advanced than we expected...India had developed its own air tactics somewhat in a vacuum. They had done some training with the French that we knew about, but we did not expect them to be a very well-trained air force."
On August 24, 2004 Robert O. Blake, the US charge d'affaires in India, disclosed that the US had approved sales of military equipment worth $233 million to New Delhi, UPI reported. Blake noted that 12 Firefinder weapon-locating radars worth $190 million had already been sold to India, and that planned sales included P-3 Orion naval reconnaissance planes and engines for the Light Combat Aircraft. He also said that India had made a request for chemical and biological protection equipment. Any defense item less than $14 million can be sold to India directly without Congressional notice.
In February 2004, the United States and India engaged in a joint exercise named Cope India. Cope India 04 was an Air Force level exercise between the USAF and the Indian Air Force (IAF) and marked the beginning of a new chapter in Indo-US bilateral relations. This was the first opportunity since 1963, for USAF fighters to operate from Indian soil.
The exercise brought together leading fighter combat aircraft and aircrew and ground crew of both air forces. The USAF flew in F-15Cs, while the IAF was represented by Mirage 2000, Su-30K, MiG-27s and MiG-21 (upgraded). The meeting ground provided a strong foundation and deep understanding towards developing a new relationship between the IAF and USAF for the future.
On May 28, 2004, Defense Daily International reported on India's increasing military ties to Israel. The Indian Navy (IN) conducted a four-day port call in Haifa, Israel with two warships (INS Mysore and INS Godavari). India's western fleet commander, Rear Adm. Pratap Singh Byce, told reporters the port call was a goodwill visit signifying the warming relationship between India and Israel and a step towards possible combined naval exercises and two-way technological transfers in the future. "Training, operational work-ups, hardware and ship design are four areas where India sees its navy working more closely with the Israelis," he added.
Diplomatic ties between the two countries resumed in 1992. Since then, the relationship between the two navies has grown significantly, to the point where India has become the largest purchaser of Israeli military products.
On March 8, the Defense Daily also reported on a $1.1 billion contract between Israel Aircraft Industries (IAI) and India for the sale of three airborne early warning aircraft (AEW).
The landmark summit between India’s Atal Behari Vajpayee and China’s Hu Jintao in June 2003 was a welcome change to the sometimes adversarial relationship between these two populous countries. Since the summit, there have been great strides between the two nations in fulfilling the pledges each of their leaders made – most notably through recent joint naval exercises off the Shanghai coast and diplomatic consultation over their disputed Himalayan border. While all seems well between the two as they champion increased cooperation, the economic and resource needs of each will fuel an underlying competition for years to come. The world should embrace and encourage the continued softening of relations between the two, for eliminating enmity and hostility will produce great peace dividends for the region. However, do not expect these former enemies to become allies as they compete for economic power through regional influence in Central Asia and their respective maritime zones.
On 14 November 2003, the Indian Navy exercised maritime security and search and rescue operations with counterparts in the Chinese fleet. The visit to the East China Sea also included a five-day diplomatic stopover in Shanghai to ‘show the flag’ as evidence of a newly formed strategic partnership, or at least a demonstration of cooperation between the former enemies. With clearly stated intentions to increase their maritime reach (into each others’ ‘backyards’), the exercise was designed to build confidence and familiarity with fleets that may someday see more of each other. The forces exercised search and rescue capabilities that could be a precursor to anti-piracy cooperation needed to protect the lifelines of their expanding economies. A landmark event for nations long perceived as staunch rivals, the exercise follows on the heels of similar joint Sino-Pakistani exercises. The mere fact that the two Asian giants were exercising militarily seems a positive step so soon after India’s Prime Minister Vajpayee’s historic summit in Beijing in June 2003.
In another area of cooperation, the two recently held working-level negotiations aimed at diffusing and finding resolution to their long-standing border dispute; the consultations are scheduled to continue in Beijing later this year. Today, both countries maintain army and air forces along the disputed border over which they fought a war in 1962, and claims were made from both sides that each others’ troops crossed the Line of Actual Control (LAC) this summer during Vajpayee’s visit to China. This perhaps highlights another reason behind the introduction of mil-mil relations through the Navy – the Indian and Chinese armies and air forces still remain in combat-ready positions opposite one another. Both recent signatories to the ASEAN Treaty of Amity and Cooperation in Southeast Asia, the cooperative endeavors between them are encouraging developments and add a new twist to the Asian security outlook.