A report published by MarketsandMarkets,“FDI Opportunities in the Indian Defense Sector, Policy Overview, Technological Capability Assessment (Airborne, Naval, and Land), Inventory Gap Assessment (Airborne, Naval, and Land), Key Indian Companies – Capabilities, Tie-ups and Profiles”, assesses the inventory held by the Indian armed forces as well as analyses their technological capability apart from providing an overview of the defense procurement policy pursued by the Indian government.
India is likely to spend $250 billion to boost its defense and aspires to shift the focus of procurement either to ‘buy Indian’ or ‘Buy and Make in India‘. A number of factors, such as obsolescence of the weapon systems held by the Indian Armed Forces and increased government spending on defense related procurement is expected to lead to various opportunities of foreign direct investment (FDI) in the country.
The Indian government has been encouraging the procurement of indigenously manufactured or developed technology and weapons systems, under its Make in India initiative. It has also revised the Defense Procurement Procedure (DPP). Original equipment manufacturers and their suppliers are expected to fulfill offset obligations and take advantage of India’s competitive advantages in manufacturing and information technology by setting up manufacturing facilities in the country. A large number of Indian private companies and publicly funded research laboratories are looking to enter the Indian defense sector.
The procurement of new equipment and technology in the coming years along with massive upgrade programs is likely to open up a huge market for all stakeholders including global original equipment manufacturers (OEMs), defense public sector units (DPSUs), ordnance factory boards (OFBs) and domestic private sector players.
The Indian government has been primarily focusing on developing domestic defense manufacturing capability as underlined in the Defense Procurement Policy (DPP) 2013, which emphasizes that imports would be the last resort for acquisition while buying made in India weapons systems would be accorded top priority. The offset requirements as mandated by the Indian government are expected to help develop the required ecosystem for major private players to emerge. This has led to various opportunities which are anticipated to spur the growth of the indigenous defense industry, including the private sector.