The Air-India board wants to buy 50 commercial aircraft worth $6 billion, from Boeing Corp. Naysayers have been quick to impute motives to the transaction, pointing out that the only beneficiary would be the Seattle-based aircraft manufacturer; a few have said that the deal is driven by politics, not commercial sense; others have suggested that it makes no sense to buy so many planes from one seller. In fact, this deal could boost India's strategic relationship with the US and New Delhi is engaged in a geopolitical balancing act, soothing US nerves at losing Indian Airlines' $2.5 billion order to Europe's Airbus.
The order is large, but that's because A-I hasn't bought planes for many years. Now, our aviation sector needs to grow very fast. For example, the number of India-China flights is scheduled to rise six times soon, from seven to 42 flights a week. So, the right question to ask is: In return for such a large order, is there anything we can get out of the US? There is. India could, for instance, ask Boeing to shift part of its manufacturing operations to India, which could become a low-cost aircraft manufacturing support centre for the US giant. This is a win-win situation: Boeing gets a huge topline lift from the order. Over time, its bottom line is boosted by cost cuts from manufacturing in India rather than in Seattle.
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While buying military hardware, India insists on co-production. Bangalore-based Hindustan Aeronautics Limited (HAL) has emerged as a competent manufacturer of military aircraft. It also makes accessories and components for Airbus. Indian companies have secured deals to make software for Boeing. Boeing already has manufacturing, services and software operations in a few places like Australia and Canada. Neither country has India's cost advantages. Therefore, Boeing could be asked to demonstrate its commitment to the Indian aviation market, from simple procurement to outsourcing. In any case, commercial plane manufacturing is an buttembly job, putting together a vast number of complex components that ultimately turn into an aircraft. Boeing should take a cue from another Seattle-based global giant. Microsoft set up its first overseas development centre in Hyderabad some years ago, and has not regretted its decision. The conditions are right for another major Indo-American partnership to take wing.
