India is the 9th largest A&D market but the largest importer of Capital Equipment globally and significantly relies on import to meet 70% of its defense needs. However, the Defense industry in India is now at an inflection point; with more projects having been kicked off in the past 18 months then were done in the previous decade. With the release of the DPP 2016, there is also an apparent shift in the policy and hence supply chain dynamics. From the overriding focus on Offsets, in the past, it now appears that the ‘Make in India’ initiative is the new flag bearer and this would lead to a larger role for Indian primes as they become the key delivery point of solutions into the MoD.
The introduction of IDDM (The Indigenously Designed Developed and Manufactured add full form) category is a right step in this direction and its consequent effects on relationships with global primes and Tier 1's and 2's could follow. It is also most likely that Indian primes will parallel accelerate their own efforts to integrate/design/build greater portions of the solutionsfor modern weapon system. This we believe will result in harnessing India’s key strength to make advancement in Defence related technology, indigenous product development and maintenance of highly configurable Defence systems leading to increase in volume of Defence related Indian software products/ services being exported.
What effects this would have on existing key players like DPSU's and DRDO's also needs dueconsideration.
The defence budget is expected to grow at a CAGR of 12% from FY11 to FY22. Over next 8 yrs., expected to grow from ~220k Cr / per yr. currently to ~515k Cr. / per yr. – driven by radical upgrade and modernization of armed forces with procurement budget of over 130 USD bn.
Total market for defence electronics in India at system-of-system level is approximately USD 18.5Bn over the next 10-12 years. Bulk of the Indian opportunity is dominated by large system of system integration programmes like BMS, TCS and NFS (give full forms and abbreviations in brackets). Overall these programmes provide ~78 % of the total opportunity coverage.
The total demand of Defence Electronics (excluding battlefield transparency and system of system programmes) in India (by user service) is ~USD 58 Bn over the next 8-10 years. Platform Electronics and Datalinks have the highest demand under the current and anticipated defenseprogrammes. Naval Systems occupy a major chunk of this demand and are currently poised to have ~40% of the total demand.
In continuing with its efforts to grow the Electronics System Design & Manufacturing (ESDM) industry, IESA with NASSCOM have come together on the DEFTRONICS platform to boost the Aerospace &Defense sectors. The Indian Aerospace & Defence Industry is one of the most lucrative industries and a booming market with an ocean of opportunities for design, prototyping, testing and manufacturing companies. While India’s current requirements on defense are largely catered to by imports; global OEM and Indian companies alike are keen to leverage the opportunity of defense contracts under the impetus provided to the “Make in India” initiative.