Key Takeaways:
India and the US entered a Security of Supply Arrangement (SOSA) on August 22 2024, which aims to improve bilateral defence relations, including improved communications, defence processes, maritime security and supply chain collaboration in peacetime and during conflict.
India is the first Global South and South Asian country to enter into a SOSA with the US, highlighting its rising importance as a key strategic partner.
The SOSA will improve India’s status, bolstering India’s geopolitical and economic importance as a major power in South and East Asia, and the Indo-Pacific. This is likely to boost investor confidence, foreign direct investment and trade opportunities.
The SOSA will likely enhance India’s potential to counterbalance China in South Asia and the Indo-Pacific, likely reducing dependence on Chinese supply chains.
Overview of Security of Supply Arrangement
On August 22 2024, the US Department of Defense and the Indian Ministry of Defence entered into a bilateral Security of Supply Agreement (SOSA). While this agreement is non-binding, it aims to ameliorate US-India bilateral ties by establishing communication mechanisms, streamlining defence processes, enhancing maritime security in the Indo-Pacific and collaboration on supply chain issues during both peacetime and armed conflicts. India is the 18th SOSA partner of the US, but stands out as the first country from the Global South, and the first South Asian country to enter into this security arrangement with the US. US Principal Deputy Assistant Secretary of Defense, Dr. Ramdass, has predicted that the SOSA will be a “key factor in strengthening US-India Defense Technology and Trade Initiative (DTTI).”
US Secretary of Defense Lloyd J. Austin III, has noted that the SOSA will enhance cooperation on defence issues, including the strengthening of supply chains and interoperability between the US and Indian militaries. It will also advance the prioritisation of co-production projects, including jet engines and munitions for the US-India Roadmap for Defense Industrial Cooperation.
As India’s naval presence in the Indo-Pacific continues to grow, it enjoys a dominant position in South Asia, alongside significant influence in the Indo-Pacific through its membership in the Quad, alongside Japan, Australia and the US. At the Asian Defense Summit in June 2024, Secretary Austin confirmed that India and the US were collaborating on the production of armoured vehicles. On August 22, during the signing of the SOSA, he stated that the US and India share their vision for the Indo-Pacific and that their defence cooperation will thus “continue to grow stronger and stronger,” as they have agreed to mutually provide support for goods and services that promote national and regional defence.
On August 26, Prime Minister Modi, after speaking with President Biden, emphasised the progress in bilateral relations and the US-India Global Strategic partnership. He highlighted India’s aim to establish itself as a democratic leader in the Global South, particularly in the Indo-Pacific and South Asian context. Improved US-India relations, backed by American military aid, collaborative arms production and supply chain cooperation are likely to bolster Indian influence in the Indo-Pacific region ever further, showcasing India’s rapid ascent as an important military and economic power on the world stage.
Enhanced US-India military relations are also likely to strengthen economic ties between the two, positioning India as a key geopolitical and economic player in South and East Asia. The SOSA brings credibility to India and will likely boost Western investor confidence, creating further opportunities for foreign direct investment in technology, manufacturing and defence.
In the Indo-Pacific, the SOSA between India and the US is likely to strengthen the Quadrilateral Security Dialogue (Quad) between the US, Japan, Australia and India, resulting in greater stability and enhanced security to the region in the long-term. This is likely to boost investor confidence in the region, encouraging the establishment of supply chains with reduced dependence on China.
Forward Look
A strengthened India, militarily and economically, will likely serve as a counterbalance to China's growing influence in South Asia. Improved economic ties with the US, and other Quad members, are likely to provide India with the potential to counter China’s Belt and Road Initiative (BRI) investments into neighbouring countries like Nepal and Bangladesh in the upcoming years. KSG assesses that India will be able to contest Chinese influence in the region through economic, military and economic means. The US will likely support India’s endeavours with tangible investment out to 2030.
Enhanced US-India bilateral ties are likely to increase pressure on Pakistan, which will likely result in strengthening bilateral ties between Pakistan-China in coming months. This growing divide is likely to further polarise South Asia, which could significantly alter trade routes and investment opportunities, forcing South Asian countries to choose a side. This would likely lead to the formation of Indian and Chinese blocs as they both vie for regional dominance, creating instability in the region, and polarised trade routes.
Instability in the region brought forward by the growing Indo-China divide is likely to cause a shift in investments and a realigning of supply chains to fit the new geopolitical landscape. Strengthened ties between the US and India, will increase credibility and confidence to invest in India, creating opportunities for increased foreign direct investment and trade opportunities in the long and medium-term.
Bolstered alliances between the Quad nations in the Indo-Pacific could potentially deter Chinese expansionism in the region. However, KSG notes that this activity is likely to make Beijing feel increasingly threatened and constrained. If Beijing assesses that its ‘constriction is tightening’, and aggressive action may force a break in that constriction, it may choose to take such actions (for example, invading Taiwan to break US military constriction). Historical analysis and wargaming on this topic shows that a great-power such as China can follow either path:
Restraint in assertive action given the deterring activities of its adversaries.
Or alternatively aggression given a perceived ‘closing window of opportunity’.
KSG will continue to assess Chinese policy and reactions for indicators of its preferred path.