India orders US helicopters as Narendra Modi begins Japan visit

US$2.5 billion deal for a Boeing fleet of Chinook and Apache aircraft announced as Modi begins visit to Japan for key regional talks with Tokyo

PUBLISHED : Sunday, 31 August, 2014, 5:01am
UPDATED : Sunday, 31 August, 2014, 5:01am

India plans to buy Boeing Chinook and Apache helicopters, an Indian defence ministry official says, in a deal valued at US$2.5 billion that could ease strained ties between New Delhi and Washington.

This news came as Prime Minister Narendra Modi flew into Japan on a five-day official visit as the nations seek to boost security ties. Modi arrived at Osaka, western Japan, by special plane for a night in the nearby ancient city of Kyoto where he had an unofficial dinner with Japanese Prime Minister Shinzo Abe.

The Indian leader would visit historic sites and an academic institution in Kyoto today before moving to Tokyo for meetings tomorrow with Japanese government and business leaders, including Abe, the official said.

The helicopter deal topped the agenda during a visit by United States Defence Secretary Chuck Hagel this month and was likely to help mend ties frayed by trade and diplomatic disputes. Modi is due to visit the US next month.

At a meeting on Friday, the government also approved an Indian navy proposal to buy 16 helicopters, the official said.

Finance Minister Arun Jaitley, however, cancelled a US$991 million tender to buy 197 light helicopters from foreign vendors and asked Indian firms to produce them at home, the official said.

Eurocopter and Russian Kamov had been participating in the tender. The government also deferred a decision on a US$2.5 billion plan for Israeli anti-tank missiles.

Abe and Modi are also expected to discuss a possible Indian purchase of Japanese-made US-2 amphibian planes.

During Modi's trip, his first outside South Asia since taking office in May, the two countries would discuss a civil nuclear pact that would allow Tokyo to export nuclear-related technology to New Delhi, the Kyodo new agency said.

It added that Abe and Modi were expected to agree to jointly produce rare earths that could be exported to Japan, a move that would further reduce reliance on China for such minerals.

Analysts estimate that India, the world's largest arms importer, will spend US$250 billion in the next decade to upgrade its Soviet-era equipment and narrow the gap with China, which spends US$120 billion a year on defence.

India's military modernisation plan includes a renewed push to develop a domestic industry. New Delhi insists on "offsets" from foreign vendors to ensure technology is transferred or some value remains in the country.

The decision to scrap the troubled light-helicopter tender comes weeks after Modi loosened the limit on foreign ownership in defence manufacturing to 49 per cent from 26 per cent to make "buy Indian" the default option for defence purchases.

"It has also been decided that Indian industry would be given the responsibility to produce nearly 400 light utility helicopters as per the requirement of the Indian Army and Air Force," an official said.

Kickback allegations, procurement delays and a recent series of operational accidents have marred efforts to upgrade India's armed forces.

A decision on the acquisition of light reconnaissance helicopters was deferred last year and tenders re-examined after Italian prosecutors alleged defence group Finmeccanica had paid bribes to Indian officials to win a separate US$750 million deal to supply helicopters for politicians.

Additional reporting by Agence France-Presse


India's growth fastest in two years

India's economic growth accelerated to the fastest pace in more than two years, beating estimates, after the central bank refrained from raising interest rates.

Gross domestic product rose 5.7 per cent in the three months ended June from a year earlier, the biggest gain since the quarter through March 2012 and compared with the 4.6 per cent growth in the previous quarter, the Central Statistical Office said.

"In the first quarter of this year, a 5.7 per cent growth rate is encouraging," Finance Minister Arun Jaitley said. "With the long-term impact of all the new initiatives setting in, I'm sure the impact in the coming quarters will be much larger." He said most sectors were looking up and the investors' mood had undergone "a sea change".

Stronger growth is crucial for Prime Minister Narendra Modi to honour a pledge of narrowing the budget deficit to a seven-year low, after keeping subsidies largely unchanged in his spending plan. He faces the challenge of rejuvenating Asia's third-largest economy amid the risk that a weak monsoon will hurt crops and stoke the region's fastest inflation.

Since taking office with the strongest electoral mandate in 30 years, Modi has blocked a breakthrough deal at the World Trade Organisation, and refrained from allowing foreign companies to take majority stakes in the defence sector.

During a parliamentary session that ended this month, opposition lawmakers scuppered Modi's attempt to revive a bill proposing more foreign investment in insurance. The setback robbed Modi of an opportunity to lure investors when he visits the US next month.