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
2009 to 2013 and USD 15.9 billion was allocated for defense capital expenditure
in the budget in 2013. Defense expenditure is expected to record a CAGR of
13.4% during 2014 to 2018, to reach a value of USD 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 that 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 2014 to 2018. 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.
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 offering the maximum defense opportunities within the next five years.
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