U.S. Firms See Opportunity as India Boosts Defense Budget

"America's relationship to India is maturing and expanding. India is an important global player now," said William S. Cohen, a defense secretary during the Clinton administration who is a member of the U.S.-India Business Council's board of directors.

The bond between New Delhi and Washington was strengthened last year with a historic nuclear deal. The deal paves the way for India to grow its civilian nuclear power industry, part of a $100 billion pie, of which the United States is hoping for a large slice.

Defense experts say that India is lagging in the Asian arms race against China. This year, Chinese defense spending reached $71 billion, second only to the United States'. China's military buildup is a concern for both the United States and India, with the latter seen by Washington as a counterbalance to China's growing dominance in the region. India is spending about $29 billion on defense this year, an increase of 25 percent over 2008 but still far below China's budget. India spends about 2 percent of its gross domestic product on defense, while China spent 4.3 percent last year and Pakistan spent 3.5 percent.

Much of India's 2,200-mile border with China is unsettled, said Ashok K. Mehta, a retired Indian general and security expert. Tensions between India and China escalated this month after media reports indicated that Chinese soldiers had crossed into Indian territory and had left Chinese calligraphy on some boulders. At the same time, China has been cementing strategic ties with many of India's neighbors: Pakistan, Burma, Bangladesh and Sri Lanka.

"A lot of people think India's number one problem is Pakistan, but it's China," said Mehta, adding that perceived threats from China, not Pakistan, prodded India to build its nuclear arsenal. "The best way to prevent a war is to reduce the gap in the military balance. The onus is now on India to catch up to China."

The Mumbai attacks, in which more than 170 people were killed by 10 gunmen who had traveled from Pakistan by sea, exposed vast gaps in India's security system. The three-day siege became a pivotal point in the country's drive to beef up and modernize its armed forces and its arsenal.

India wants its strategic reach to extend beyond the Indian Ocean and the Arabian Sea, where Indian naval forces protect vital sea lanes from pirates. Nearly 90 percent of India's oil imports arrive by sea.

"Everywhere India turns, it sees enemies. China is breathing down India's neck. Afghanistan is a failed state. Pakistan is aflame. Sri Lanka is still unstable. The list goes on and on," said Brahma Chellaney, professor of strategic studies at the Center for Policy Research. "It's really saying something when we see our most stable neighbors as Bangladesh and Myanmar," he added, referring to Burma by its other name.

Indian analysts say that U.S. priorities in India have shifted since a decade ago, when Washington brought military sanctions against New Delhi after its 1998 nuclear tests. Those sanctions have slowly been phased out.

"India will look back -- generations down the road -- at this period as a defining moment for its new, modern military," said Roger Rose, chief executive of Lockheed Martin India, which is renting half a wing of New Delhi's Taj Palace Hotel for a 12-person office. "I think we can all see that there are a lot of threats shared between our two democracies."