Finally, the Indian government seems to have convinced its domestic detractors that it is indeed “nonaligned” and that its foreign policy is not being crafted in Washington.

Nothing works better in New Delhi than a putdown of the United States. And what a snub this has been. Despite extensive lobbying by the U.S. military-industrial complex, supported by President Barack Obama himself, India has rejected bids by Lockheed Martin and Boeing for a $10 billion-plus contract for 126 medium multi-role combat aircraft (MMRCA).

Instead, New Delhi has short-listed Dassault Aviation’s Rafale and the Eurofighter Consortium’s Typhoon. Extensive field trials and technical considerations ostensibly drove the final decision. But the dismay in Washington is widespread and, to some extent, understandable given the investment that the U.S. has made in cultivating India in recent years.

As if to underscore the importance of this development, the U.S. Ambassador to India, Timothy Roemer, decided to announce his resignation at the same time the decision on MMRCA came down in public, though he has insisted that this resignation is related to “personal, professional and family considerations.”

At one level, the seeming transparency of the process should indeed be heartening to those who have been puzzled by India’s inability to get its defense modernization program on track for some time now.

In mature democracies, the policy and process of defense contracts should be above board. For a usually lackadaisical Indian Ministry of Defense (MoD), this is a welcome change. After years of returning unspent money, the MoD last year not only managed to spend its entire budget but also asked for money to spend on capital procurement.

And now with movement on MMRCA bids, it is clear that the ministry wants to move swiftly on new defense procurement, relegating its ultra-cautious approach to the sidelines.

But major defense purchases are a means to an end, not an end in and of themselves. At a time when the political dispensation in New Delhi is embroiled in a whole host of corruption scandals, it has used this decision to insulate itself from charges of favoritism toward America.

In a way it’s a masterstroke. To its domestic policy critics, the government has signaled that despite all the heft of the U.S. military-industrial complex, India refused to budge. To its foreign policy critics, there was the signal that New Delhi remains in thrall to no one, not even the United States.

The present government has been viewed as being too cozy with the U.S., and there were signs of discontent within the ruling Congress Party itself on this score.

Recent revelations from WikiLeaks about the pressure on New Delhi during the negotiations over the U.S.-India civilian nuclear energy pact had put the government in a difficult position. The decision on MMRCA allows the government to make the case that it is its own master.

The danger is that, in the process, New Delhi may have dealt a severe blow to its burgeoning ties with the U.S. Despite Obama’s visit to New Delhi in November 2010, during which he endorsed India’s candidacy to the United Nations Security Council, there is a growing sense in New Delhi and Washington that bilateral ties are drifting.

Both governments have other priorities. The Obama administration is too consumed with domestic economic troubles and the Indian government has been battling charges of incompetence and corruption at a number of levels. New Delhi has also made some overtures to other power centers in recent months.

At the United Nations, India scuttled attempts by Western powers to strongly condemn the Syrian government for its attacks on protesters, merely asking the Security Council to urge all sides to abjure violence and seek a peaceful resolution.

And before this there was India’s abstention on Libya at the Security Council as well as the much touted BRICS summit in China at which the joint statement underscored the need for a realignment of the post-World War II global order that was based on the untrammeled supremacy of the U.S.

The decision on MMRCA will only reinforce the perception in Washington that the much-touted strategic partnership between U.S. and India is more hype than substance. But one defense deal doesn’t a relationship make.

India will soon be announcing a $5 billion deal for 10 Boeing C-7 heavy-lift transport aircraft with an additional order for a further six as well as more orders for Lockheed’s C-130J Hercules transport aircraft.

Aside from defense, India shares a wide range of interests with the U.S., the most significant of which is to confront a rising China. At a time when China’s rapid rise is upending the extant balance of power in the Asia-Pacific region, both India and the U.S. need each other.

The U.S. faces the prospect of an emerging power transition in Asia, and it needs new partners to provide strategic stability to a region where the center of gravity of global politics and economics is rapidly moving.

India, for its part, is trying to come to grips with an ever more assertive China in its vicinity and needs U.S. support if it is to protect and enhance its vital national interests.

It would indeed be a pity if a defense deal ends up becoming a benchmark in defining the future trajectory of this very important bilateral relationship.

Harsh V. Pant teaches at King’s College London.

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