For Indian defence firms, a special US deal is on the way

Mint

2 days ago

India and the US are working on a landmark deal that would open up each country's defence purchase market to the other, marking a significant step forward in their strategic relationship, two people aware of the development said.
The Reciprocal Defence Procurement Agreement (RDPA), if finalized, would give Indian companies direct access to the world's largest defence market worth $850 billion, and enable their American counterparts to tap into India's manufacturing and technology sector. This would also make India the 29th signatory to the US framework, and the only Asian signatory after Japan. An official announcement is likely within a year, but it would also depend on factors including the ongoing trade negotiations with the US, the people cited above said on the condition of anonymity.
'In light of the current geopolitical environment, especially after Operation Sindoor, India sped up talks with the US for a full-fledged RDPA. The rationale has been that while there have been many interim agreements opening up the two markets for strategic technologies, most of them still require approvals from the US Department of Defence, as well as other paperwork under foreign affairs, export and import controls, and so on. Both nations recognize the need for an RDPA, and talks are now closing in at the final stage," one of the two people said.
Smoother process
An RDPA will enable Indian makers of defence components and technologies such as spy satellites to sell directly to the US. Companies can choose to partner closely with US entities, without needing express approvals of the two governments, currently a cumbersome affair. Talks for an RDPA happen in the backdrop of recent American tariffs on Indian goods, and ongoing talks for a bilateral trade agreement.
Experts said that with the RDPA in place, India's defence firms, which exported a record ₹23,622 crore of goods in FY25, are likely to see a major fillip.
'For India, even with the Security of Supply Arrangement (SOSA) signed in August last year, the current agreements and bureaucratic deals have kept multiple roadblocks in place. For the US, India has so far been a Soviet-heavy defence market—getting access to it will be key as in the current geopolitics, India is a crucial ally for the US in the East," said Vivek Mishra, deputy director for strategic studies at global think-tank, Observer Research Foundation.
'Think of this as a deal that would give India a massive defence manufacturing market from the US to cater to, via partnerships signed under the ambit of the RDPA. Doing so is crucial for both countries right now, and has for long been the logical step forward for the ties of the two nations," Mishra added.
Queries sent to the holding companies of Kalyani Strategic Systems and Alpha Design Technologies, as well as the Mahindra Group and Indian-American space-tech startup Pixxel remained unanswered. An email sent to the Ministry of Defence also did not receive responses.
Explaining how the deal would work, the second official cited above said, 'The current International Traffic in Arms Regulations (ITAR) rules are a Department of State affair in the US, which seeks to control access of US technology in foreign nations. The Strategic Trade Authorization, meanwhile, comes under the Department of Commerce—and establishes export control to prevent access of technology outside of the US. RDPA, under the US Department of Defence, will primarily establish the ability for Indian defence entities to view and apply for US defence tenders, and vice-versa."
Building on ITAR
The deal will build on existing Indo-US agreements in defence and technology, such as the joint initiatives announced by prime minister Narendra Modi and US president Donald Trump, during the former's US visit in February. These include a review of the existing ITAR, which industry experts said is still a bureaucratic and restrictive process.
'The leaders announced plans to sign this year a new ten-year Framework for the US-India major defence partnership in the 21st century… (and) determined that the US would expand defence sales and co-production with India to strengthen interoperability and defence industrial cooperation," a statement by the Ministry of External Affairs said on 13 February.
Bharat Forge's Kalyani Strategic Systems, the Adani group's Alpha Design Technologies, Centum Electronics and others currently rely on ITAR clearances to supply defence technologies to US entities. Some examples include Kalyani's artillery cannons deal with AM Design, and Mahindra Group's partnership with Anduril for autonomous marine systems, both announced in February this year.
"This would be a massive push for the Indian defence market, which is currently worth around $80 billion. The US, meanwhile, has an $850-billion defence market. India's aspiration is to scale up its defence exports to $6 billion by 2030. Even if Indian private firms can capture 1% of the US market, this represents a massive business opportunity for them," the second official added.
ORF's Mishra also said that for India, the US is the biggest target market. "We do have a bilateral defence agreement with France, but not with the UK. This means that the US is a one-of-a-kind target for Indian private firms, and an RDPA will majorly boost the domestic market," he added.
Streamlining
The lack of a streamlined process has pushed startups, such as Bengaluru-born Pixxel and Digantara, to set up independent US entities to pursue defence contracts with the National Aeronautics and Space Administration (Nasa) and the Defense Advanced Research Projects Agency (Darpa) in the US.
The process, however, has meant that defence supply deals remain far and few in nature.
'The RDP Agreement would assist the Indian companies to develop internationally acceptable standards and certifications in order to access the massive US defence market, which will in turn also increase their competitiveness and acceptability in other defence markets," said Shailender Arya, senior advisor, defence and national security at global policy advocacy firm, The Asia Group.