A Look at India's Aerospace and Defense Industry
|India's Make in India movement has seen increased FDI in Aerospace sector.
When we think of Tata or Mahindra, we have an obscured thought of all these rusty vehicles running around streets of Kathmandu. The trucks, the jeeps, the 4WDs. These Indian brands are household names in Nepal. They are the lifeline of our meager transport infrastructure that heavily relies on roads.
Turns out, these brands are heavy weights not just on roads, but in Aerospace and Defense (A&D) sectors as well. With Indian Prime Minister Modi's Make in India movement, Foreign Direct Investment (FDI) cap, as Aviation Weekly reports [HERE], is now 49% up from 26%. In cases where new technologies are involved, the cap can go upto 100% depending on what's being built. Combine that with cheaper workforce and a very talented pool of engineers, India has been a very attractive place for such investments to flourish.
Exploiting such governmental policies, private companies like Tata and it's subsidiary Tata Advanced Systems Ltd. (TASL) are already bound to become of the largest private defense companies in the nation of over a billion population. Since 2009, TASL has linked up with Sikorsky, Boeing and Lockheed Martin (Sikorsky's parent company) to build parts and components of helicopters and fighter jets in India. These cooperation not only bolsters the industry and creates jobs but allows the country to take a sneak peak at blueprints. After all, the idea for collaboration is technology transfer. And India is leveraging cheaper costs, export capabilities and excellent human power to improve on their A&D technology.
Mahindra's approach has been a conservative to say the least. As reported on the same article on Aviation Weekly, SP Shukla, president of Mahindra Aerospace and Defense, states that the company is still in "phase one" and that "tinkering only comes at the second phase." The company's philosophy to build to specifications is primarily to learn how to build from scratch first through rapidly copying designs, developing a better understanding of systems and then tweaking later on. The idea isn't new; that's how most technologies are learnt anyways. Shukla adds that the third stage will allow Mahindra to start designing their own avionics and electronics. That's exactly what the company did with Radar systems after a Joint Venture (JV) with Telephonics. Began with assembly and then moved on to development.
With current estimates, India's A&D is around $250 million. That might look like a big number but in a global market of $100 billion, the country still has a lot of ground to cover. A&D trade deficit is huge, considering that our noisy neighbor is one of the largest importer of defense goods in the world.
What we do have to look at though, is the trend. And that's only looking up for India. Domestic companies like Dynamatic Technologies Ltd. insourcing designs and manufacturing, state owned Hindustan Aeronautics Ltd. have a history of making Russian and French helicopters under license and multinational such as Boeing heavily tapping into young 20 something Indians will only aid the expansion of A&D and not the other way round. Add Tata and Mahindra to the mix and you can see why there's an air of optimism in the industry in 2019.