The US policy of rebalancing the Indo-Pacific region has made the superpower seek reliable allies in the region. The emerging economy and political power in the region, India, with its strategic location, has come as a best bet for US.

With India recently hiking the cap on the entry of foreign direct investment (FDI) in defence sector from 26 per cent to 49 per cent, the US views it as an unique opportunity. The India-US Defence Trade and Technology Initiative (DTTI) inked two years ago when the UPA government led by Dr Manmohan Singh was in power, has come in handy to further the defence engagements between the two countries.

The DTTI, which was presented by the then US Defence Secretary Leon E Panetta and subsequently shepherded by the then US Deputy Defence Secretary Ash Carter, has on its agenda proposals for co-production and co-development. The Modi Government which is aggressive in its effort to modernise the Indian Defence Industry by liberalising its FDI policy is seeking to take the DTTI forward. The Indian Defence Minister Arun Jaitley and the US Defence Secretary Chuck Hagel, who was recently on a three-day visit to India, agreed to extend the New Framework for the US-India Defence relationship well before it expires in July 2015.

Mr Jaitley, however, is hopeful that the cooperation would result in increased indigenisation capabilities of the Indian defence industry through co-production and co-development. He has said: “The development of our own indigenous capabilities is a major objective that guides our present policies. In this direction, we have taken steps to raise the FDI cap in the defence sector. We look forward to work closely with the US in this regard.” The FDI policy has stipulated that that the projects will have full Indian management and control.

Technology transfer is the key to modernisation and Mr Jaitley might note the words of Ash Carter who said earlier: “We’ve adapted our system in ways that will speed our release process for India… especially in the Department of Defence, recognising that for all partners this process is subject to case-by-case review and there will always be some technologies that we will keep to ourselves.” This means that India will not receive some key sensitive latest technologies.

There are other issues like relaxation in US export control regime, licensing agreements, licence exceptions, end-use monitoring which need to be sorted out by both sides.

However, Hagel said that DTTI now has on the table over a dozen specific cooperative proposals that would transfer significant qualitative capability, technology and production know-how. “To build a broad foundation for co-development, and because both our nations hone the leading edge of scientific and technological innovation, we are also working together to advance our joint cooperative science and technological priorities. This includes areas ranging from big data to cognitive sciences to chemical and biological defence and material sciences,” he has said.

Other items on the table for co-production and co-development are maritime helicopter, naval gun, surface-to-air missile system and scatterable anti-tank system.

Mr Hagel has reiterated that India and US would co-produce and co-develop the next generation Javelin anti-tank missile. “This is an unprecedented offer that we have made only to India and no one else,” he said. Javelin is a man-portable, fire-and forget, anti-tank missile employed by dismounted infantry to defeat current and future threat armoured combat vehicles.

While for the Javelin project US will partner only with India, there are several other defence projects US have with other countries, particularly Australia, a strategic country in the Indo-Pacific region and with UK. To quote Mr Carter, “We’ll ensure that those innovative projects receive priority funding. This is an approach we’ve only ever taken with the United Kingdom and Australia and now India will join that company.”

Mr Hagel did not fail to spell out the US game of rebalancing. While he was in Delhi at a public lecture at Observer Research Foundation, he said: “But today, as India ‘Looks East’ and the United States ‘rebalances’, our interests across the full span of the Indo-Pacific region are aligning more closely than ever.”

Another aspect that draws US closer to India in defence cooperation is the growing Indian market. Since 2008, over $9 billion in defence contracts have been signed between US and India compared with less than $500 million for all the years before. This makes US one of the top three defence suppliers to India after Israel and Russia.

In March 2009, the Obama administration cleared $2.1 billion sale of eight P-8 Poseidon aircraft to India that are patrolling the shores of the Andaman & Nicobar Islands. During President Obama’s visit to India in November 2010, US signed $5 billion agreement to supply Boeing C-17 Globemaster III military transport aircraft and general electric F414 engines. US also agreed to supply six C-130 J Super Hercules special operations aircraft. US is also mulling sale of 22 Apache attack helicopters, 15 Chinook heavy lift helicopters, 145 ultra light howitzers, M777 guns of BAE systems.

However, Mr Hagel has spelt out that in rebalancing game in Indo-Pacific region, US would have “a constructive relationship” with China and “seek to manage competition, but avoid traps of rivalry” and at the same time India-US-Japan trilateral security cooperation should be elevated to ministerial level building upon the joint naval Malabar exercise.

India-US defence relations are waiting to take final shape when Indian Prime Minister Narendra Modi meets US President Barack Obama for a summit level meeting in Washington in September and subsequently the Indian Defence Minister Arun Jaitley visits the Pentagon in October this year.