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November 26, 2014

Boeing Considers India Partners as Modi Offers ‘Welcome Change’

Boeing Co. (BA), the world’s largest planemaker, is considering investing in India as Prime Minister Narendra Modi eases rules for foreign investment in the defense sector and expedites arms contracts.

The Chicago-based aerospace company is in the process of identifying partners “for a strategic and meaningful relationship,” Dennis D. Swanson, the New Delhi-based vice president at Boeing Defense Space & Security, said in an interview in New Delhi on Nov. 24. Modi’s decision in July to allow overseas investors to buy as much as 49 percent of Indian defense companies is a “welcome change” that Boeing wants to study further, he said.

“That has made a difference because it provides an opportunity to not only invest in India, but also to explore the export market out of here,” Swanson said. “We want to have more than a purchase-order based relationship. In the 2015 time frame, you’ll see Boeing in strategic partnerships in India.”Boeing is among companies stepping up engagement with India as the U.S. surpassed Russia as the top supplier of defense equipment to the South Asian country in the three years to March. Boeing, which is close to winning a $2.5 billion deal to supply 22 Apache attack helicopters and 15 Chinook heavy-lift transport aircraft to the Indian Air Force, is counting on more as Modi modernizes the nation’s defenses to deter neighboring China and Pakistan.


Cracked Barrel ::
Modi, who became prime minister in May, raised the foreign direct investment limit in defense to 49 percent from an earlier cap of 26 percent as he vowed to bolster the defense industry and reduce reliance on foreign weapons. Modi is also seeking to rely less on state-run companies that have failed to help replace obsolete weapons.

Last year, the barrel of a locally made piece of artillery produced off 1980s blueprints cracked when it was test fired, while efforts by Hindustan Aeronautics Ltd. starting in 1983 to design and build a light combat aircraft haven’t yet shown results.

“It gives companies more latitude to work beyond the 26 percent,” Swanson said. “I know others feel the need to cross over the 50 percent barrier. My feeling is that it makes a difference even at 49 percent.”

Lockheed Martin Corp. (LMT), the largest U.S. government contractor, said in July that though Modi’s move to raise the limit was positive, the Indian government needs to do more to attract big-ticket products involving intellectual property.


Top Importer ::
India surpassed China in 2010 to become the world’s largest arms importer and relies on purchases from abroad for 70 percent of its weapons, according to the Stockholm International Peace Research Institute.

Besides using software from Indian companies including Tata Consultancy Services Ltd. (TCS), Wipro Ltd. and Infosys Ltd., Boeing has sourced components such as exit doors for the 757 aircraft, uplock boxes and flaperons for the 777, gunbay doors and wire harnesses for the F/A-18 and transponders for the Poseidon P-8i from Hindustan Aeronautics and Bharat Electronics.

The aircraft maker wants to enhance those partnerships for a wider variety of work under Modi’s “Make-in-India” program, Swanson said.

Boeing is ready to supply 22 Harpoon anti-submarine missiles to India in a deal worth $200 million, while there’s also an option for 11 more Apaches and seven more Chinooks in a later follow-on order, he said.

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