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US wants India to raise foreign equity cap in defence

Calling India a "rising global power", Washington has asked New Delhi to undertake new reforms and raise the cap on foreign equity in Indian defence firms to give more opportunities to US companies interested in defence sales in India.

world Updated: Feb 25, 2010 12:36 IST
Arun Kumar

Calling India a "rising global power", Washington has asked New Delhi to undertake new reforms and raise the cap on foreign equity in Indian defence firms to give more opportunities to US companies interested in defence sales in India.

"India is a rising global power, soon to be the world's most populous country, with a trillion dollar-plus economy," Robert O. Blake, assistant secretary of state for South and Central Asian Affairs, told the Washington International Business Council in Washinton on Wednesday.

Noting that President Barack Obama had called India an "indispensable" nation during Prime Minister Manmohan Singh's state visit, he said: "The strength of India's economy makes it the powerhouse of South and Central Asian regional growth."

"The Indian economy has been one of the fastest growing economies in the world since 2003, averaging 8 to 9 percent growth in recent years," Blake said and suggested: "If India can sustain its economic reforms, it has the potential to sustain close to double digit growth rates for many years to come".

"Reforms to date have made Indian companies leaders in areas such as information technology, pharmaceuticals, telecommunications, and now increasingly, in manufacturing as well as in clean energy," he said.

Blake also hoped "the Indian government will seize the opportunity to undertake new reforms that will both attract new investment and propel higher growth.

"We are also urging the Indian government to raise the cap on foreign equity in Indian defence firms from 26 percent to 49 percent to provide more opportunities for US companies interested in defence sales in India."

The US had "some important recent sales with the C-17s, C-130Js, and the P8 maritime patrol aircraft", Blake said, adding: "But there are significant new sales on the horizon, up to $18 billion worth of contracts, for which American companies are competing".

The most notable of these is the multi-role combat aircraft purchase which by itself is a $10 billion sale in which two American companies -- Boeing and Lockheed Martin -- are competing against European and Russian firms.

"Obviously that would be an extremely important contract for American suppliers and something that we in the government will be advocating and following very closely," Blake said.

The landmark civil nuclear deal "has also opened up new possibilities that did not exist for US firms several years ago", he said, while noting: "The Indian government has already designated for US firms two sites in Gujarat and Andhra Pradesh -- two of the most business-friendly states in India."

The Energy and Global Climate Change pillar of the India-US strategic Dialogue also offers potentially significant opportunities, Blake said, observing "India is a rapidly emerging technological and entrepreneurial power".

Citing a McKinsey & Company study suggesting "80 percent of the India of 2030 has yet to be built", Blake said: "India has acknowledged that it stands to be seriously affected by the impacts of climate change and has begun taking important steps to transform to a low-carbon growth model".

Turning to the importance of the private sector, the official noted the US-India CEO Forum had been expanded "to focus on how government can work with the private sector to really capitalise on the energies, ideas, and practical experience of the private sector".

The US also wanted to strengthen the private sector's role throughout its dialogues with India -- in agriculture, information and communication technology, health, and education, to name just a few, Blake said.