New Delhi: Ahead of the upcoming visit of Prime Minister Narendra Modi to US which would be his sixth to that country and first since Joe Biden became President and the developments in Afghanistan towards whose development India had played a major role, a report by KPMG-AMCHAM on the increasing defence and strategic partnership assumes significance.

Even as the US suffered a rather humiliating setback in Afghanistan in the wake of its withdrawal from that country and the coming to power of the radical Islamic group Taliban after a gap of twenty years, the report  says Indo-US ties are strategically indispensable and commercially promising.

The report assumes significance in the current international developments in the South Asian region as it says that the alliance between India and the US is one of the defining relationships of the 21st century.

The bilateral trust has grown into a global strategic partnership driven by convergence of interest on regional and global issues. The relationship between India and the US has witnessed considerable improvement owing to the political will of both the countries which ensured that the India-US relationship remain on a growth track and become more profound year on year. Both countries have more than 50 dialogue mechanisms covering cooperation in areas of defence and security, trade and investment, civil nuclear energy, cyber security.

Even as the study paints a picture of Indo-US relationship being on a growth trajectory, there are areas that need to be smoothened out since the Democratic Party of President Biden was not pleased with the September 2019 visit of Modi where at a rally of the then American President Donald Trump at Howdy Modi, the remark by the Indian prime minister “abki baar Trump sarkar,” had not gone down too well as it was viewed as a foreign leader interfering in American politics.

However, plenty of fence mending has taken place with Modi and Biden having three virtual meetings this year starting with the QUAD Summit in March, Climate Change Summit in April and the G7 in June.

And the now upcoming in person meeting between the two leaders – Modi and Biden – is significant in the light of the fast moving developments in Afghanistan and the increasing role being played in the region by Russia, China and Pakistan.

In this context, this report titled “India-US Defence Partnership – The Road Ahead” is important as it focusses on the evolving Indo-US defence relationship and also showcasing that while US has only recently started supplying defence equipment to India in the last decade, there have been significant investments of American companies already in India which are generating employment, exports and helping India make strides in its defence capabilities and prowess.

In the present day developments in the region, the US-India increased defence cooperation and commercial relationship is of immense value to both nations.

The commercial relationship between the US and India has matured significantly over the years. Two-way trade has grown. In the prevailing geo-political backdrop, defence cooperation is a key cornerstone of Indo-US relations which is imperative both from a strategic and commercial standpoint. It has taken time for the two countries to develop strategic ties built on cohesive ambitions of economic growth and geo-political leadership.  Indo-US ties are witnessing an upward trajectory regardless of the political leadership, and will continue to remain so, owing to mutual gains on the economic and strategic front. This relationship has been fostered and strengthened by a number of significant events and milestones.

The report says Indian Government has recently taken a slew of measures to ease the policy framework around Defence sector to promote investment and in-country manufacturing.

American Original Equipment Manufacturers (OEMs) have made existing investments towards building manufacturing and service hubs in India both in civil and defence domains which have been generating employment, skill development, development of allied industries, enhancement of exports and technology transfers to the country.

The report said that even though majority of the sales to Indian Ministry of Defence (MoD) by American companies have only been concluded in the recent five to seven years, there have been significant investments made by American companies in India.

Apart from commercial and technological benefits, various US OEMs have also been supporting India through a string of social initiatives covering a number of programmes being run by the Government. These investments are being directed towards the future of the country, impacting lives positively.

The report suggests changes in FDI policy and defence policy so that they are  in sync with each other and FDI up to 74 per cent should be allowed in all categories of acquisition.

In view of synergies between defence, civil aerospace and homeland security (HLS), sourcing of civil aviation and HLS products should be an offsetable activity. It said Defence contracting should be modified and aligned with global best practices. The report suggested that the 0.5 offset multiplier on components should be reconsidered.

In his observation, Gaurav Mehndiratta, Partner and Head – Aerospace and Defence, KPMG in India said, “As India aspires to achieve a US$ 5 trillion economy, self-reliance in defence manufacturing has been recognised as one of the key areas of focus. With India’s liberalised policy regime, the stage is set in favour of India’s establishment as a key defence manufacturer in the global defence supply chain. This report talks about the evolving Indio-US defence relationship and also highlights the way forward and expected synergies between the two nations. It details the roadblocks, which require tangible action from both sides.”

“Considering the entire ecosystem, Indo-US partnership, specifically in the area of defence is expected to flourish in the years to come, with India gaining from the sophisticated technology and manufacturing prowess of the US and the US playing a significant part in opportunities emerging from the growing Indian defence sector,” he said.

Commenting on the report, Abhishek Verma, Partner – Aerospace and Defence, KPMG in India said, “India and US strategic ties have grown stronger over the years which has ensured greater military interoperability between the countries. The countries are collaborating across all spectrums of warfare in  the military sphere wherein defence cooperation has emerged as a major pillar of India and US partnership.”

Ranjana Khanna, Director General CEO, AMCHAM said, “Stronger US-India defence partnership is strategically important in the global scenario and extends beyond the bilateral.”

– The writer is a senior journalist and media consultant. The views expressed are of the writer and do not necessarily reflect the views of Raksha Anirveda.