In 2011 India began to realise its potential as the worlds most important emerging market for defence equipment, announcing a remarkable number of procurement agreements in the final months of the year.

Moreover, the majority of these procurements were for the Indian Air Force (IAF), which has long complained that it lacks the requisite number of aircraft. However, the country has so far failed to match its rise as a defence market with a similar upswing in its capacity to produce defence equipment domestically, and the vast majority of the US$80bn it plans to spend on new equipment by 2015 will be spent on imported materiel. This is widely regarded as a missed opportunity for Indian industry.

A winner in the IAFs long-anticipated Medium Multirole Combat Aircraft (MMRCA) tender was due to be announced in December 2011 at the time of writing, with only the Dassault Rafale and Eurofighter Typhoon still in the running. The US$11.0bn deal is initially for 126 aircraft, though both the value of the contract and the number of aircraft required could grow significantly over time. Other significant air force procurements in Q4 included a request for six new Lockheed Martin C-130J transport aircraft for around US$1.2bn; 22 Boeing AH-64D Apache Longbow helicopters worth US$600mn; the purchase of two new Russian-Israeli Phalcon airborne warning and control system (AWACS) aircraft for an estimated US$800mn; and the decision to procure 75 Pilatus PC-7 Mk II basic trainers for US$565mn.

Though tensions between India and its two main regional rivals – Pakistan and China – have often been high in the past, there were signs of improvement in Indias relations with its two neighbours in late 2011. In November, Pakistan conferred Most Preferred Nation status on India, signalling an upturn in trade between the two countries and, it is hoped, more cordial relations in the future. Also that month the two countries effectively reset their relationship to the time preceding the 2008 attack on Mumbai, which was staged by the Pakistan-based terrorist group Lashkar-e-Toiba, with the two countries prime ministers hailing what they regarded as a new chapter in bilateral relations.

Meanwhile, with Chinas attention fixed firmly on the South China Sea and US activities in the Pacific, a window opened up for an improvement in Sino-Indian ties. Bilateral defence ties, which had broken down in early 2010, were repaired in November 2011, with Beijing and Delhi agreeing to resume their dialogue in December and a resumption of joint military exercises expected in 2012. Prime Minister Manmohan Singh met his Chinese counterpart Wen Jiabao at Novembers East Asia Summit, although Indias intention to conduct oil and gas exploration in Vietnamese waters – which are claimed by China – remains a potential stumbling block to further improving relations. The implications of a breakdown in Sino-Indian relations become ever more serious, however; the two countries continue to build up their military assets near the disputed border.

Relations with the US also continued to improve, as seen partly in the significant upswing in military sales to India, and also in Washingtons attempts to involve Delhi in its controversial F-35 Lightning II Joint Strike Fighter programme. With its contenders for the MMRCA deal already eliminated, the US has been energetically promoting the F-35 as a future option for the IAF. India has the luxury of waiting to see how the troubled programme fares over the next few years, although analysts have pointed out that the naval version of the F-35 might be a good fit for the countrys new aircraft carriers.

One of those carriers, the INS Vikramaditya, an ex-Soviet ship that has been the subject of a muchdelayed and over-budget refit programme conducted in Russia, is now due to be inducted into Indian Navy service by December 2012, Defence Minister AK Antony announced in October. Under the terms of another delayed naval programme originally agreed in 2004, Russia has for a long time been due to lease the nuclear submarine Nerpa to India after a refit that has been repeatedly held up, not least by an accident in 2008 that resulted in 20 deaths. However, this saga – the like of which has come to typify Indian procurement over the last decade – may now be coming to an end, with Antony saying that the submarine was finally due to be delivered to the Indian Navy in November 2011, though at the time of writing its arrival had not been confirmed.

In terms of domestic security, while India has not witnessed a repeat of anything on the scale the 2008 Mumbai attacks, two recent attacks – one on Mumbai in July 2011, which killed 22 people, and another in Delhi in September, which took 11 lives – served as a reminder that the threat posed by terrorists remains acute. The Indian government is particularly concerned about the spread of Islamist militancy as international forces in Afghanistan begin to turn their attention to pulling out of the country by 2014, and is working with the government in Kabul to mitigate this risk.