At the heart of the development is India’s insistence on local manufacturing, which mandates that at least 30 percent of parts in imported defence products are made in India.
For a country that’s known as the world’s biggest arms importer, India’s defense market is a notoriously difficult nut to crack.
Airbus SE hasn’t won a single military contract for half a century. Unperturbed, the European firm is building a supply chain in the South Asian nation, training and expanding a slew of existent part-makers that already help it build commercial jets. The hope is to easily meet local sourcing norms when, and if, it eventually wins an order.
Airbus isn’t alone. The likes of Lockheed Martin Corp., Saab AB and Boeing Co. — gearing up to bid for the world’s biggest fighter jet order in play — are also looking for more local partners who can build sophisticated parts for defense products. At the heart of the development is India’s insistence on local manufacturing, which mandates that at least 30 percent of parts in imported defense products are made in India.
Building a self-sufficient domestic arms industry — a key facet of Prime Minister Narendra Modi’s push to increase the share of manufacturing in the country’s economy — will be at the forefront of a government-organized defense expo near Chennai this week. Dozens of foreign and local companies are hoping to catch Modi’s eye when he addresses the event on April 12, aiming to win a chunk of business for India.
Still, local production and sourcing is not a natural fit for the majority of companies. Most original producers of defense goods are actually assemblers rather than manufacturers, and setting up shop in India requires not only investing in training a local supply chain, but also convincing major global part-makers to do the same.
Make in India Officer
Airbus is a case in point. In 2016, less then two years after Modi took power, Airbus appointed Ashish Saraf as its ‘Make in India’ officer, the only company to create such a position. His job is to ensure a credible supply base in India that can contribute to the company’s defense products. It’s also a strong signal to the government about its seriousness to build in India.
“It is a dual industry where people who do defense goods also do commercial aerospace goods,” Pierre de Bausset, managing director for Airbus Group in India, said in an interview in Hyderabad in March. It makes sense to “leverage what we are doing in commercial aerospace to be relevant in defense campaigns — whether they are for helicopters, for defense airplanes.”
The opportunities are immense. India will set up a budget of $620 billion in the eight years to 2022, and local and foreign firms would have business opportunities of $168 billion, according to a study by the Federation of Indian Chambers of Commerce and Industry and Centrum Capital Ltd.
$15 Billion Deal
That potential has attracted companies like Lockheed Martin Corp., the world’s biggest defense contractor. Lockheed is pitching its F-16 fighter jets for a tender for 110 combat aircraft worth at least $15 billion, and has vowed to move its entire production line for the jet to India if it wins the deal.
“This will put India right into the biggest fighter’s global supply chain immediately,” Phil Shaw, who heads Lockheed’s India operations, said in an interview in New Delhi. “That will give a leg up to what the government is looking for — to try and get an ecosystem developed.”
One potential roadblock is India’s slow pace of decision making. Although Modi wants to modernize the country’s aging military equipment with a $250 billion investment, he’s been bogged down by a defense procurement process that’s known for delays, backtracking and corruption, making it a sensitive, slow-going process.
The warplane deal is a prime example. India started looking for new warplanes in 2007, a contest that ended with the government selecting Dassault Aviation for 126 Rafale jets for $11 billion. With talks stalling over price and quality guarantees, the government scrapped the purchase in 2015 and bought 36 jets separately to speed up the process. The nation last week started the entire process all over again.
Nowhere is the rush to boost local manufacturing more visible than in the fighter jet deal that’s still to be concluded. While Lockheed has partnered with salt-to-software conglomerate Tata Group to bid for the order, Saab has teamed with billionaire Gautam Adani to offer its Gripen jets. The Indian order mandates that at least 85 percent of the planes are built in India.
“Our plans in India are based not just on selling products but on creating a defense eco-system which would involve hundreds of Tier-1, -2 and -3 partners, vendors and suppliers, ” said Mats Palmberg, vice president of industrial partnerships and business area, aeronautics at Saab AB. “Saab would incubate partnerships between its global supply chain and Indian suppliers.”
India is a Big Big Market for Present and Future Defence Procurements. It’s all but natural for Lockheed Martin, Airbus, SAAB, Boeing and others to flock to India for a pie from the Current Indian AirForce Fighter Jet Order. What is important for India is to get Technology, MakeInIndia and Get Investments for Defence Production into Indian Economy.