When India and China went to war in 1962, the Indian Army's supply routes in its remote northern valleys quickly became overstretched. Keen for closer ties with New Delhi, U.S. President John F. Kennedy loaned India a squadron of C-130 transport aircraft, which flew regular sorties to resupply Indian troops. The effectiveness of the American planes left a lasting impression on many in south Asia's largest military, as Lockheed Martin's International Director for Business Development Edward Arner learned during recent negotiations to sell an updated model of the C-130 to India. Retired officers "still talk about those days and the plane with affection," says Arner.
More than four decades later, affection has finally blossomed into something you can take to the bank. Lockheed Martin announced this week that it will supply six Super Hercules C130-Js to India in a deal worth $1 billion a breakthrough that the U.S. hopes will open a floodgate of orders for its military hardware. During the Cold War, India relied on the Soviet Union for most of its arms, and Russia is still India's biggest supplier. Now U.S. companies want to cash in on closer political and strategic ties between America and India and grab a much bigger slice of India's defense spending.
The payoff could be huge. To replace and update India's still largely Soviet-era military equipment, New Delhi says it will need to spend $45 billion over the next five years. As China ramps up its military spending, India's arms budget is likely to keep growing as well, not least because the two Asian goliaths share a disputed border and their relations remain tense. "As we look at India's commitment to modernizing its forces we see a wide range of opportunities," says Lee Whitney, Lockheed Martin's Vice President of Strategy and Marketing Communications. "[The C-130J] gets us off to a good beginning."
But the competition is fierce. The fifth Defense Expo held this week in New Delhi attracted hundreds of exhibitors from 39 countries including Israel and France, both gaining fast on Russia in arms sales to India. Many of the foreign firms emphasize that they want to partner with Indian companies and could set up manufacturing operations there if the orders are big enough. State-run Israel Aerospace Industries has just entered a joint venture with Indian industrial conglomerate Tata Group to produce drones, radar and electronic warfare systems.
The next big prize: an Indian Air Force order for 126 multi-role fighter jets that could be worth more than $10 billion. The prospects have Lockheed, the world's biggest defense contractor, and U.S. aerospace giant Boeing salivating along with their Russian and European rivals. "The sector is opening up fast," says Lavina Gupta, Director of Anjani Technoplast, a company based in northern India that makes body armor, helmets and armored vehicles. "People have started looking up towards India. We are good entrepreneurs, we have the talents, it's just that we are now being recognized as a market. Everybody wants to be here."
Not everyone will profit, however. India's bureaucracy still moves slowly, and huge social and infrastructural demands on the country's budget compete with defense spending. Jerry Powlen, Vice President of Integrated Communication Systems for U.S. defense contractor Raytheon, acknowledges that sales growth in India has been "slower than anyone had hoped it would be." But he says the emerging country is crucial for future growth. India "is one of the most important markets for us as a company going forward and the United States wants to foster good relations with India," he says. "It gets better every day."