It’s lift off for Indian A&D

Posted on 5 Jul 2010 by The Manufacturer

Britain is well placed to capitalise on an Indian aerospace and defence industry which is “growing at unprecedented rate and emerging as a global heavyweight”, according to a report by Deloitte and the Confederation of Indian Industry (CII).

India’s defence procurement budget is expected to hit US$42bn by 2015 and the country is predicted to spend around US$80bn over the next five years on capital expenditure.

Deloitte says there are strong existing relationships between UK and Indian firms which means we are well placed to capitalise on this spend. India has set a 26 per cent limit on direct foreign investment which means partnerships with Indian companies are vital.

“India’s domestic defence sector is likely to require specialist input into both platform and systems development. This demand can be met by foreign firms, including those from the UK given our aerospace heritage and market leading R&D programmes and innovation,” says Pauline Biddle, UK head of aerospace and defence at Deloitte.

“There are many opportunities for foreign companies to partner with the Indian defence industry, some which could be facilitated by the ‘Buy and Make’ Indian opportunity. UK companies, including BAE and Rolls & Royce have already started their expansion into the Indian aerospace and defence market. Similarly, other UK companies in the automotive sector who have been in India for a long time have good prospects to tie up with Indian majors in the sector. I predict that we will see a dramatic rise in the number of Indian joint ventures with foreign firms over the next five to ten years.”

Nidhi Goyal, director in Deloitte’s Indian aerospace and defence team, says: “India is recognised as the next international manufacturing destination given its competitive strengths including wider supplier base, comparative low cost of labour, persistent focus on infrastructure development and huge pool of skilled workforce.”

On India’s target for 70% of new acquisitions in the future to be sourced from domestic production, he adds:

“In order to meet the target 70% indigenisation, local industry should achieve an average growth rate of 30% per year over the course of the next five years. At present the current offset contracts are still not sufficient for Indian industry growth and hopefully the target for offset contracts at US$10bn by 2011 will give the necessary boost that is required by the industry.”