Indian Defense Industry one of the Fastest-Growing

Friday 15 March 2013, Amsterdam

The Indian defense industry is one of the fastest-growing global defense markets. India’s defense capital expenditure, which refers to the part of the defense budget that is spent on the acquisition of all types of military hardware and technology, grew at a CAGR of 5.8% over the review period and, in 2013, US$15.9 billion was allocated for defense capital expenditure in the budget. Defense expenditure is expected to record a CAGR of 13.4% during the forecast period, to reach a value of US$70.2 billion by 2018. This is primarily due to the fact that the country’s aging military hardware and technology needs to be replaced in addition to building defense against domestic insurgencies and hostilities emanating from neighboring countries. The strong growth in the industry is attracting foreign original equipment manufacturers (OEMs) and leading companies from the domestic private sector to enter the market. Moreover, the rise in terrorism is leading to sharp increases in the defense budget and a shorter sales cycle, which offers an attractive proposition for defense manufacturers.
    
The country is expected to procure unmanned combat aerial vehicles (UCAVs), advanced electronic warfare systems, combat systems, rocket and missile systems, fighter and trainer aircraft, stealth frigates, and submarines during the forecast period. In addition, its expenditure on IT and communications is expected to increase significantly, with a strong focus on enterprise applications, systems integration, and real-time mobile communications. In fact, in September 2012, India entered into collaboration with the US to learn how to develop a robust cyber security mechanism to safeguard its key and critical infrastructure areas.

Figure 1: Indian Defense Expenditure, 2008-2012

 
                                                                                                                                               

The country relies upon imports to procure defense equipment with advanced technology. In fact, India currently procures approximately 70% of its military equipment from abroad, but the government's aim to reverse this balance and manufacture 70% or more of its defense equipment needs in India offers an immense opportunity for both domestic and foreign companies in the sector. Of the respondents from Asia-Pacific who participated in the SDI Business Outlook Survey 2012, 73% cite India as a country having the maximum defense opportunities in the next five years.