The Indian aerospace and defence (A&D) sector has come of age over the last many decades – from complete dependence on platform imports, to the key role played by Defence Public Sector Units. Now, the sector is moving towards the credible inclusion of the Indian private sector companies as partners for A&D manufacturing. While the story of this shift from a very “transactional” approach to defence procurement to “strategic partnerships” will unfold in the coming months, let’s take a look to see what it means for A&D Multi-National Companies (MNCs), (some of which have been active in India for 50-60 years in various capacities) while others aspire to get a foot in the door, given the market opportunity.
India is one of the top 10 defence spenders in the world and is dependent on foreign countries for over 70 percent of its defence platforms / content. This includes most of the critical technology the country uses. Therefore, the asset deficit and demand-supply gap in Indian A&D sector is huge. Coupled with that, the delay in procurement means further compromises in India’s buying capacity due to the depreciating rupee and global inflation. While the government has taken steps:
Credible steps need to be taken to enhance the industrial capability and train talent to take up specialised jobs in the A&D sector.
While this is good news for MNCs (who have been complaining about the slow movement in defence procurement and the twisted process), this also means that even established companies will need to shift their India strategy to continue to have the right to play in the A&D sector here. The key drivers necessitating this and their implications:
This brings us to the key question – how can A&D MNCs be successful in India given this context? While any MNC which keeps indigenisation core to its India strategy and takes policy as an input and enabler stands to have higher success probability, some ideas come to mind:
Implications of these suggestions may vary given the level of maturity of various MNCs in India. However with the major shifts that have been proposed in the Indian A&D sector, the game will go to the one who plays their cards right over the next three years.
- By Anurag Garg, Director – PwC Strategy & (Aerospace & Defence Lead)
The thoughts and opinions shared here are of the author.
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