In the aftermath of conflict with Pakistan and security threats on two fronts, emphasis is on swiftly strengthening India's defence capabilities. This week, Rajnath Singh announced a new approach to India's 5th-gen multi-role stealth advanced medium combat aircraft (AMCA) programme. Currently in its development phase, it will see private firms and PSUs compete to work with state-owned Aeronautical Development Agency (ADA) to induct the fighters into IAF by 2035.

India has also been buying advanced, combat-proven military platforms with speed, reliability and transparency under the G2G framework. Such agreements exist with Russia, France, the US and Israel. The S-400 missile defence systems from Russia, and Rafale fighter jets from France were not built in India. They were imported through the G2G route.

The French and Russians have demonstrated tech transfers within a government wrap-around. But US military platforms have always been directly imported. Along with developing long-term indigenous capabilities towards strategic autonomy, the future of defence procurements might lie in a middle path that Washington and New Delhi are exploring under the G2G mechanism. This could reshape how India secures itself.

Since the 2008 nuclear agreement, the US has become a $24 bn defence partner, supplying 10% of India's military imports. Major US military sales to India include C-17 Globemaster and C-130J Super Hercules transport aircraft, P-8 Poseidon maritime patrol aircraft, CH-47F Chinook heavy-lift, MH-60R Seahawk and AH-64E Apache attack helicopters, and M777 ultra-light howitzers. India was also the first international buyer of P-8s.

All these platforms have been directly imported through the US G2G Foreign Military Sales (FMS) route, without any local production or transfer of tech. This approach worked when India was a smaller player. But with India's legitimate regional power aspirations today, the old model is inadequate.

The M777 ultra-light howitzers deal in 2016 marked the US' first concession to 'Make in India' policy. The contract was signed only after BAE Systems agreed to relocate its assembly, integration and test (AIT) facilities to India. However, it ran into several problems. RBI normally does not allow foreign companies to open project offices under the FMS programme. BAE Systems needed a special approval. GST applied at multiple stages of sale, and local tax exemptions were not available.

It was unclear if sovereign agreements overrode India's tax laws or not. A view was taken that they did, and were, therefore, fully tax-exempt. This may be open to interpretation. These were not merely tax technical issues, but showed a fundamental incompatibility between the hybrid FMS final-assembly model and India's tax and regulatory framework. This experience highlights why India-US defence cooperation needs a new approach.

These matters are likely to affect other similar deals. NITI Aayog is reviewing defence laws, and proposing structural reforms to simplify taxation, reduce bureaucracy and create a more investor-friendly environment.

France's Naval Group has built Scorpene-class Kalvari submarines at Mazagon Dock under the French inter-governmental agreement (IGA). Russia's United Aircraft Corporation (UAC) has established a production line for Sukhoi Su-30MKI Flanker fighter jets at HAL under Russia's Inter-Governmental Commission (IGC).

Unlike France and Russia, the US has not built a military platform in India for India. This may change soon. Pursuant to the Modi-Trump meeting in February, India and the US have agreed to pursue co-production arrangements for the Stryker infantry carrier vehicle (ICV) and Javelin anti-tank guided missile (ATGM) within FMS.

For the first time, the US is considering building weapons in India and sharing weapon systems tech. However, the details are unclear. It would likely happen in stages. The initial buy would be direct imports to meet immediate operational needs, while subsequent phases would focus on manufacturing in India, possibly through a licencing or JV model, with an Indian partner.

But India wants more. The key lies in structuring these partnerships as genuine collaborations, not just manufacturing arrangements. Co-design and co-development of future upgrades of the weapon systems, with joint IP and provisions for joint exports, would create mutually beneficial long-term ties that transcend traditional buyer-seller dynamics. Real co-production partnerships create high-skilled jobs, build domestic capabilities, increase local content, integrate into global defence supply chains and open up export opportunities.

More importantly, it offers a path to a high-level strategic partnership. Its success, most likely, will depend on how much tech the US is willing to share. More than 80% of tech transfer is unlikely, given the US' reluctance to share 'gold box' sensitive technologies, and its concerns about IP protection and tech security. The ongoing negotiations for GE's F414 jet engines to power the indigenous Tejas Mk 2 LCA highlight the problem. Despite a proposal for 80% tech transfer, talks have been stuck since 2023.

India doesn't have to choose between buying equipment quickly for immediate security needs, and building long-term domestic capabilities. It can do both at the same time.

But to do that, India must recalibrate its strategy, and the Stryker and Javelin projects to get the balance right. The US should see this as a chance to elevate defence ties with India. With the US government promoting defence sales to India, now might just be the right time.