India is the world's largest importer of defense equipment,
spending $40 billion annually on military purchases. An IHS Jane's report notes
that Asia's third-largest economy is poised to become the fourth-largest
military spender in the world by 2020, surpassed only by the U.S., Russia and
China.
The right-wing Bharatiya Janata Party, which assumed power
last May, promised in its election manifesto to beef up the country's defense
industrial base. India's dependence on imports will be whittled down by Modi's
"Make in India" campaign. India imports nearly 60 percent of its
defense needs, accounting for 15 percent of the world's weapon imports.
Eventually, Modi hopes that India will also become an exporter of defense
equipment. It has also allocated 12% more of its budget to the military
compared with the interim budget tabled by the previous government in February
2014. Though the industry started to change and modernize under the previous
Congress-led government, the bulk of the country's military equipment is still
imported. On Apr. 10 India announced it would buy 36 fighter jets from France's
Dassault Aviation for an estimated $4.3 billion. Sweden's Saab is set to
re-pitch their Gripen planes, eliminated in the Rafale tender, as the kind of
lighter, single-engine aircraft that Defense Minister Manohar Parrikar said on
Monday the air force needed to rebuild its fleet. "We are here and we are
ready," said a source close to Saab, which is proposing to establish
"fully-fledged production" of the Gripen in India alongside a local
partner. Modi’s government earlier
shortlisted Larsen & Toubro and Pipavav Defence for a $10 billion contract
to build six submarines. U.S.-based Lockheed Martin, the world's largest
weapons manufacturer, formed a joint venture with India's Tata Advanced Systems
to produce parts for the C-130J Super Hercules plane.
To facilitate foreign and private participation, the Modi
administration last year said it would allow foreign investors to own up to 49%
of the equity in Indian defense companies. Other regulatory changes include
removal of restrictions on the issuance of annual industrial licences, and
those on the sale of controlled products by publicly owned companies to private
ones, as well as the decision for the military to order $250 billion of
equipment. The Confederation of Indian Industry and Boston Consulting Group
states that if India is to achieve its target of lifting its manufacturing
sector to account for 25% of gross domestic product, the defense sector has to
take the lead.
On March 5, tycoon Anil Ambani’s Reliance Infrastructure
paid $132 million for an initial stake of 18% in Pipavav Defence and Offshore
Engineering, the country's largest shipbuilding and heavy industry company. It
wants to increase its share to at least 25.1% in order to take control, with
the intention of becoming "the country's biggest defense
manufacturer." The Reliance group subsidiary is also in talks with
Eurocopter of France, Kamov of Russia, and Sikorsky of the U.S. about
technological tie-ups. Company sources said that the company plans to bid for
upcoming tenders to make hundreds of military helicopters valued at about $4
billion. If it wins the contracts, the helicopters will likely be made in a
proposed 5,000-acre defense and aerospace infrastructure facility called
Dhirubhai Ambani Defence Park -- named after the billionaire's father.
His rival and older brother, Mukesh, who helms Reliance
Aerospace Technologies and has a tie-up with France's Dassault Aviation, harbors
ambitions to become one of the country's largest manufacturers of combat jets. Tata
group, Mahindra & Mahindra, Larsen & Toubro, Punj Lloyd and Bharat
Forge are also fighting for a bigger slice of an industry expected to generate
$100 billion in revenue over the next decade.
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