Frost: Indian Defense Industry Holds Billion Dollar Investment Opportunities
June 26, 2008 // Published as a news service by IHS
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The upcoming modernization program of the Indian Armed Forces will make India the Asia-Pacific region's second highest defense spender within the next five years, and the seventh largest globally by 2016.
According to Frost & Sullivan, there are significant business opportunities within the Indian defense industry and particularly within the Indian Armed Forces.
Recent analysis from Frost & Sullivan found that the total spending for the Indian defense market will reach $36.2 billion by 2013.
Total opportunities for procurement are forecast to exceed $100 billion by 2022, including the maintenance, repair and overhaul (MRO) market. The offset potential during the forecast period is expected to reach $10 billion by 2013.
At a recent Frost & Sullivan briefing on the Indian defense industry, Commodore A.J. Singh, naval adviser for the High Commission of India, said "indiginization" is the new mantra for the country's huge procurement program.
Singh indicated that the Indian Air Force offers the biggest opportunities for the international defense market, and that the Indian Navy also has an ambitious expansion agenda, with nearly 40 ships under construction.
As for defense exports, India is the U.K.'s third largest customer after Saudi Arabia and the U.S., according to Malcolm Haworth, operations director for the U.K. Trade and Investment Defense and Security Organization (UKTI DSO).
According to Dr. Pracheesh Mathur, from Raytheon, the Indian Defense Procurement Panorama has bureaucratic tangles, but not funding issues. He said that the end-user is very tech-savvy and always looking for high-tech solutions.
He stressed the advantages of local involvement - of having an "Indian footprint" - and that "relationships tend to trump contacts," although the rule of law prevails. He added that the Indian civil security market was an area of significant future spending.
It's important to note the significance of the procurement process of India's mandatory offset conditions in military contracts, analysts said, and the cap on foreign direct investment (FDI) in Indian defense industries.
Analysts said to treat the offsets as an investment opportunity and watch the aftermarket support as an important, steady revenue stream over the longer term. Market participants need to develop partnerships with the Indian defense industry and establishment, where total imports are worth an estimated $12 billion in 2008 alone.
Source: Frost & Sullivan.