India to buy $2 billion missile systems from Israel

The Dollar Business Bureau

India, one of the world's largest defence importers, and Israel, globally known as a top exporter of military prowess, have signed a historic defence trade deal of $2 billion. Under the said deal, Israel will provide India with advanced surface to air missile (SAM) systems. These defence systems are used to target enemy aircraft, drones and missiles within a 50 km - 70 km range.

The mega defence deal is a big step towards expanding bilateral defence cooperation between the two countries ahead of PM Modi's visit to Tel Aviv in July, 2017. This will also give a fillip to the total trade between India and Israel which stood at $4.9 billion as of 2015-16, registering negative growth every year since 2011-12, when it was at a high of $6.7 billion.

Under the agreement, Israel has agreed to partially manufacture and assemble components in India to reduce India's import bill and aid the flagship program of the incumbent BJP government, 'Make in India'. The missile system will be jointly designed by Israel Aircraft Industries and India's Defence Research and Development Organisation (DRDO).

Russia had also recently expressed openness in kick-starting component manufacturing in India in collaboration with Indian defence giants like Hindustan Aeronautics Limited and Mahindra and Mahindra.

The government's decision to raise the FDI limit for defence sector is likely to attract more big ticket defence partnerships between Indian manufacturers and technologically equipped foreign countries. As India's soviet-era military infrastructure and equipment nears the stage of dilapidation and obsolescence, the Centre is increasingly focusing on renewing its military might to counter potential threats from hostile neighbours like China and Pakistan.

The move also shows India's commitment towards diversifying its defence supply base, as it is known to source most of its advanced military systems from Russia. This is the second major bilateral defence deal concluded by the NDA government after the $8.8 billion contract signed with France last year for the procurement of 36 Rafael fighter jets.