IMAGE:Dibyangshu Sarkar/AFP/Getty Images

SETTING FOOT IN INDIA: Spectators at the Aero India 2007 air show admire a Boeing C-17 Globemaster transport plane.

Ever the global iconoclast, India has reacted positively to the policies of U.S. President George W. Bush. It supports the global war on terror, likes Bush's free-market philosophy, and appreciates his administration's efforts to relax rules governing cooperation in nuclear energy. Thus, while the United States has seen its relations with many countries deteriorate since 2001, its relations with India have achieved unprecedented warmth.

As a result, India is suddenly a hot market for U.S. corporations peddling aerospace and defense wares—though some in India have expressed serious concerns about whether New Delhi's enthusiasm for American military hardware is really in the subcontinent's long-term interest.

With a five-year defense modernization budget in excess of US $30 billion, India is being courted by arms exporters like never before. “Today, nobody buys [defense equipment] like India buys. And it will continue to be one of the world's principal weapon buyers,” says Rahul Bedi, a Jane's Defence Weekly analyst in New Delhi.

Historically, India has relied on Russia for its military hardware needs, though in recent years it has imported equipment from the UK, France, and Israel, too. All along, largely for political reasons, U.S. contractors could not find a foothold in India. But now the U.S. defense industry is working closely with the Pentagon and the U.S.-India Business Council (USIBC), in Washington, D.C., to ensure that it tops the shopper's list.

“After the enormous growth [of the] U.S.-India strategic and defense relationship over the last three to four years, we want to make a breakthrough in defense sales,” the U.S. ambassador to India, David Mulford, said at the international Aero India 2007 air show, held in Bangalore in February.

India's enormous defense requirements include 126 multirole combat aircraft, a deal worth about $7.5 billion; eight long-range maritime patrol aircraft, worth at least $1 billion; 197 light utility helicopters, worth $600 million; and some tactical transport aircraft (Lockheed Martin Corp. is supplying six C-130J planes to the Indian air force). The prize catch is the multirole fighter, for which Boeing and Lockheed are contenders, along with Dassault of France, MiG of Russia, Saab of Sweden, and Eurofighter, a consortium of European manufacturers.

Lockheed says it is prepared to transfer technology and manufacturing capability to India in connection with potential aircraft programs, such as the multirole combat aircraft program, for which Hindustan Aeronautics is the designated company. It may work with Hindustan Aeronautics on a joint F-16 program, adapting the famously successful fighter to Indian needs [see photo, “Tata at Controls”].

Boeing, which is in the race to provide the multirole fighter with its F/A‑18 Super Hornet, has also offered to coproduce the plane in India—which would make India the only country to manufacture the fighter plane outside the United States.

“India is the largest fighter deal since the beginning of the 1990s. It represents one of Boeing's largest potential growth markets for defense products in Asia,” says Mark Kronenberg, Boeing vice president of integrated defense systems for Asia-Pacific.

Not wanting to be left in the dust, European companies are also making attractive offers. The Eurofighter group, for example, has invited India to partner with its four member countries—Britain, Germany, Italy, and Spain—on the aircraft, intended to be Europe's next, and perhaps last ever, manned fighter plane.

India encourages, and in some instances requires, local participation in defense deals and technology transfer. To that end, Lockheed Martin set up the India Innovation Growth Program as a two-year project to prepare Indian companies to launch early-stage technologies in the global marketplace. Lockheed's Indian partner in the program, the Federation of Indian Chambers of Commerce and Industries, plans to jointly administer it with the IC2 Institute at the University of Texas, Austin.

Meanwhile, Northrop Grumman Corp. signed with Bharat Electronics of Bangalore to explore coproducing defense and aerospace electronics. Katie Gray, vice president of the F-16 program at Northrop's Electronic Systems, says the company has identified close to 50 Indian companies it wants to work with. Among other things, Northrop is trying to sell its Hawkeye 2000 airborne early-warning and battle-management system to the Indian navy.

Raytheon Co. is set to collaborate with Tata Power Co. in strategic electronics, and Boeing has inaugurated a five-year program with the Indian Institute of Science, in Bangalore, to design a “wing of the future.”