India is already a large commercial and defence aircraft market. With rising passenger traffic and increasing military and defence expenditures, the demand for aircrafts is expected to increase further. The Indian aerospace industry is one of the fastest growing sectors. India is expected to become the 3rd largest aerospace industry by 2020.
The current government has brought in significant policy reforms over the last three years. The new Defence Procurement Procedure (DPP 2016) and National Civil Aviation Policy (NCAP 2016) highlight the intent of the government to alter the status quo and that’s a positive sign.
There are several factors driving growth in manufacturing in Indian aerospace industry. These include both macro and micro factors - strong economic growth that has resulted in rapidly growing domestic aircraft demand, the liberalization of civil aviation policies, offset requirements, a strong domestic manufacturing base, cost advantages, a well-educated talent pool, the ability to leverage IT competitiveness and a liberal Special Economic Zones law that provides attractive fiscal benefits for developers and manufacturers.
Regardless of the country’s air navigation policy, India has certainly become a major aerospace hub. India’s aerospace industry growth indicates that the country is rapidly building capabilities to emerge as a preferred destination to support the global A&D supply chain. With the Government opening up and providing enormous opportunities to the private sector, many global and domestic players are collaborating and having joint ventures for manufacturing of aero components, Maintenance, Repair and Overhaul (MRO) facilities for civil and military aviation sectors, besides overhaul and maintenance of aero engines. India’s MRO segment is estimated to grow at 10 percent and reach USD 2.6 billion by 2021.
Global commercial aircraft fleet is expected to grow at a CAGR of around 4% during 2016-2035. Boeing has forecast a need for over 39,600 aircraft to be added during 2016-2035, with approximately 38 percent deliveries to airlines in the Asian region. Airbus has forecast a demand for 33,070 new aircraft deliveries during 2016-2035. On an average, around 42% of the demand will be for replacement of the existing aircrafts and 58% will be the incremental growth. Single-aisle airplanes will dominate the world’s fleet with around 71% share of new deliveries during 2016-2035. A majority of these deliveries will be around Asia-pacific region – with India, China, South East Asia and the Middle East being key markets for the global aircraft majors.
The Indian defence expenditure has increased at a CAGR of 9.7% from 2008-2016, reaching current levels of USD 42.83 bn in 2017-18. The cumulative capital budget till the end of 12th to 14th five-year plan (2012- 2027) for the Indian Air Force (IAF) is projected to be approximately US $218 billion; out of which 69 percent is towards acquisition of aircrafts and aero engines. IAF will be spending about US $150 billion on aircraft and aero engine in the next 15 years, and is expected to grow by 10-15% every year. This indicates a large pipeline of orders in military aircraft segment, with a growing need for Indian sourcing partners.
Foreign OEMs will have freedom to choose offset partners over course of contract along with ease of replacement of existing partners, bringing in more competition and efficiency. For contracts with foreign OEMs under Buy (Global) category, offsets are applicable for contracts above US$ 300 Mn (INR 2000 Cr). Existing Offset obligations of foreign OEMs are approximately USD 5 Bn. Offsets for another 10 to 12 Billion USD are in the pipeline, which will be required to be discharged over the next 8 to 10 years.
India is already a large commercial and defence aircraft market. With rising passenger traffic and increasing military and defence expenditures, the demand for aircrafts is expected to increase further. The Indian aerospace industry is one of the fastest growing sectors. India is expected to become the 3rd largest aerospace industry by 2020.
The current government has brought in significant policy reforms over the last three years. The new Defence Procurement Procedure (DPP 2016) and National Civil Aviation Policy (NCAP 2016) highlight the intent of the government to alter ...