In 2013, the Defence offset contracts in India is expected to increase by crossing the $10 billion mark for the first time since the policy was implemented eight years ago. In the defence sector, the Indian government might raise the foreign investment limit from 26 %to 49 %, India is set to see a rush of investments, according to research firm Deloitte’s Aerospace & Defence outlook 2013.
In 2012, the government introduced new defence offset guidelines to further boost local manufacturing. But, since the policy came into effect in 2005, Indian companies have signed total offset contracts worth $4.5-5 billion with foreign firms.
India is one of the promising aerospace and defence (A&D) markets in the world due to the increasing demand in A&D equipment for the armed forces. Major goals in certain deals are expected to be achieved in 2013, such as submarines, missiles, and the Indian Air Force Medium Multi-Role Combat Aircraft (MMRCA). More abroad companies will be involved in the Indian market and new joint ventures are likely to be signed between Indian private and overseas companies, according to Deloitte’s report.
India offers cost advantages relating to basic design and engineering services, components, and assemblies manufacturing. This advantage could lead to the integration of overseas suppliers that directly supply equipment to the Indian government with the local manufacturing sector.
The global defence industry can take advantage of the promising Indian Aerospace & Defence market due to the increasing demand of A&D equipment by the armed forces, according to Nidhi Goyal, director, Deloitte Touche Tohmatsu India.
The global industry has an opportunity to join together with the Indian industry to set up their manufacturing lines in India, which could be achieved either through joint ventures or collaborations, is mainly because of huge offset requirement and the Indian government’s objective of building up an indigenous manufacturing base, according to Goyal.
Countries like China, Russia, India, Brazil, South Korea, and others are increasing their defense spending rapidly due to economic affordability and national security interests.
In 2012-13, India is expected to spend $74.5 billion on weapons. Once indigenous manufacturing is established, the Indian government would focus on research and development (R&D) for the native military industry and civil aircraft, according to independent reports.