NEW DELHI - When US President Barack Obama arrives in India next month, he will face a key challenge of boosting defense ties that are on the upswing but mired by political suspicion over pandering to Washington's interests.

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Underlying the visit will be lobbying for billions of dollars in contracts to overhaul India's mostly Russian-supplied military, a relic of their Cold War era partnership.

Those orders include a $11 billion deal for 126 fighter jets that could benefit US' Boeing and Lockheed Martin Corp France's Dassault, Russia's MiG-35, Sweden's Saab and the Eurofighter Typhoon are also competing.

But Washington faces a host of hurdles, including Indian worries that signing defense pacts which are necessary for the US arms sales to go through may land New Delhi into a wider entanglement with the US military.

While Prime Minister Manmohan Singh has reached out to Washington over his last six years in powers, many within his own Congress party as well as his parliamentary allies are reluctant to embrace these pacts, pending over three years.

"India is weighing to see if all these agreements are to give a wider room to manoeuvre for US forces in the region," said Siddharth Varadarajan, strategic affairs editor at Hindu Newspaper in Delhi.  "There is a mismatch in expectations from the relationship. India wants weapons sales as a transactional relationship, the US is seeking exclusivity in partnership," he said, referring to any US desire to make the Indian military an active element in its strategic expansion in the region.

A KPMG report this month said the misgivings over the pacts were "roadblocks" in sustaining the momentum in the relationship.

Obama's challenge is not as much in winning contracts as it is in lifting ties to a long-term military partnership in a region where Washington is now fighting a war and seeking ways to contain China's rise.

And the defense pacts Washington wants India to sign underscore some of those challenges.

One pact is the Logistics Support Agreement (LSA), which would allow American military to use Indian facilities for operations like refueling. Indians fear India could be used as a launching pad for military operations in the region.

Two other pacts are required under US domestic laws to transfer sensitive defense technology. India fears the military will have to share communications secrets with the United States.

"These agreements need wider consultation. They have various implications," an Indian defense ministry official told Reuters.

Developing Ties

Once on the opposite sides of the Cold War, India and the United States began warming up to each other about a decade back, the paradigm shift coming with a 2008 civil nuclear deal that then President Bush pushed to end India's nuclear isolation.

And the growing convergence in defense ties is manifest in India agreeing to buy US military hardware worth some $10 billion in government-to-government sales in the past two years.

The United States has held more military exercises with India than any other country. Two-way trade has risen to close to $50 billion from just $5 billion in 1990.

Indian Prime Minister Manmohan Singh was also the first state guest of the Obama administration last year.

But what India is looking for is reassurance that Washington takes New Delhi seriously as a global partner and will not sacrifice Indian interests as it seeks to bolster rival Pakistan to combat Islamist militants.

This may help explain India's reluctance to go into a bear hug with US military at the risk of alienating its time-tested ally Russia, and other European powers such as Britain and France which are trying to boost ties, including military, with India.

"India and the US need to work out how the relationship has shifted," said Evan Feigenbaum, a South Asia expert at Washington-based think tank Council on Foreign Relations (CFR).

"Security is not just about procurement and contracts, it needs to reflect the new nature of the relationship."

Indian confidence could be boosted if Obama declares his support for a permanent seat for India on the UN Security Council and further eases US export controls on dual-use technologies that have both conventional and nuclear use.

"It's not an either-or situation. The maturation of US-India defense ties is steady and is well rounded in most respects," said James Clad, former US deputy assistant secretary of defense for Asia and now with Pentagon's National defense University.

There are other irritants in the relationship, including problems over India's nuclear liability regime, a sector holding big plumbs for US' Walmart., General Electric and Westinghouse Electric, subsidiary of Toshiba Corp.